A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 4 percentage points during the first half of the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of G-III Apparel Group, Ltd. (NASDAQ:GIII) during the quarter.
Is G-III Apparel Group, Ltd. (NASDAQ:GIII) a worthy investment right now? Hedge funds are getting less optimistic. The number of bullish hedge fund bets fell by 4 recently. Our calculations also showed that GIII isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the fresh hedge fund action regarding G-III Apparel Group, Ltd. (NASDAQ:GIII).
Hedge fund activity in G-III Apparel Group, Ltd. (NASDAQ:GIII)
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in GIII heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Columbus Circle Investors held the most valuable stake in G-III Apparel Group, Ltd. (NASDAQ:GIII), which was worth $67 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $52.3 million worth of shares. Moreover, Scopus Asset Management, Buckingham Capital Management, and Millennium Management were also bullish on G-III Apparel Group, Ltd. (NASDAQ:GIII), allocating a large percentage of their portfolios to this stock.
Seeing as G-III Apparel Group, Ltd. (NASDAQ:GIII) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest investment of the 700 funds watched by Insider Monkey, valued at about $6.3 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $4.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as G-III Apparel Group, Ltd. (NASDAQ:GIII) but similarly valued. We will take a look at GTT Communications Inc (NYSE:GTT), Novanta Inc. (NASDAQ:NOVT), CenterState Bank Corporation (NASDAQ:CSFL), and Cirrus Logic, Inc. (NASDAQ:CRUS). This group of stocks’ market values match GIII’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $274 million in GIII’s case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand GTT Communications Inc (NYSE:GTT) is the least popular one with only 14 bullish hedge fund positions. G-III Apparel Group, Ltd. (NASDAQ:GIII) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CRUS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.