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Here is What Hedge Funds Think About Chico’s FAS, Inc. (CHS)

In this article you are going to find out whether hedge funds think Chico’s FAS, Inc. (NYSE:CHS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Chico’s FAS, Inc. (NYSE:CHS) ready to rally soon? Money managers are in an optimistic mood. The number of long hedge fund bets moved up by 1 in recent months. Our calculations also showed that CHS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the latest hedge fund action surrounding Chico’s FAS, Inc. (NYSE:CHS).

What does smart money think about Chico’s FAS, Inc. (NYSE:CHS)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in CHS a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in Chico’s FAS, Inc. (NYSE:CHS). Renaissance Technologies has a $11.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is Contrarius Investment Management, led by Stephen Mildenhall, holding a $7.3 million position; 0.9% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish consist of Steven Baughman’s Divisar Capital, Jerome L. Simon’s Lonestar Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Lonestar Capital Management allocated the biggest weight to Chico’s FAS, Inc. (NYSE:CHS), around 2.08% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, setting aside 1.54 percent of its 13F equity portfolio to CHS.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in Chico’s FAS, Inc. (NYSE:CHS). Balyasny Asset Management had $0.1 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.1 million position during the quarter. The following funds were also among the new CHS investors: Brian Sheehy’s Iszo Capital, Joel Greenblatt’s Gotham Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks similar to Chico’s FAS, Inc. (NYSE:CHS). We will take a look at Applied Optoelectronics Inc (NASDAQ:AAOI), SB One Bancorp (NASDAQ:SBBX), Chiasma Inc (NASDAQ:CHMA), and Cerecor Inc. (NASDAQ:CERC). This group of stocks’ market valuations are closest to CHS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAOI 8 12005 -5
SBBX 6 8649 -1
CHMA 12 45011 0
CERC 5 76950 1
Average 7.75 35654 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $31 million in CHS’s case. Chiasma Inc (NASDAQ:CHMA) is the most popular stock in this table. On the other hand Cerecor Inc. (NASDAQ:CERC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Chico’s FAS, Inc. (NYSE:CHS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately CHS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CHS were disappointed as the stock returned 9.7% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.