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Here’s What Hedge Funds Think About Coty Inc (COTY)

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Coty Inc (NYSE:COTY).

Is Coty Inc (NYSE:COTY) worth your attention right now? Money managers are taking a bullish view. The number of bullish hedge fund bets advanced by 3 lately. Our calculations also showed that COTY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). COTY was in 22 hedge funds’ portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with COTY holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the recent hedge fund action surrounding Coty Inc (NYSE:COTY).

Hedge fund activity in Coty Inc (NYSE:COTY)

Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards COTY over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, David E. Shaw’s D E Shaw has the largest position in Coty Inc (NYSE:COTY), worth close to $39.1 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $30.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers with similar optimism contain Guy Shahar’s DSAM Partners, David Harding’s Winton Capital Management and Joel Greenblatt’s Gotham Asset Management. In terms of the portfolio weights assigned to each position DSAM Partners allocated the biggest weight to Coty Inc (NYSE:COTY), around 3.46% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to COTY.

As industrywide interest jumped, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Coty Inc (NYSE:COTY). Arrowstreet Capital had $6.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $5.8 million position during the quarter. The other funds with brand new COTY positions are Noam Gottesman’s GLG Partners, John Overdeck and David Siegel’s Two Sigma Advisors, and Philippe Laffont’s Coatue Management.

Let’s check out hedge fund activity in other stocks similar to Coty Inc (NYSE:COTY). These stocks are Masimo Corporation (NASDAQ:MASI), Newell Brands Inc. (NASDAQ:NWL), China Eastern Airlines Corporation Limited (NYSE:CEA), and The Mosaic Company (NYSE:MOS). This group of stocks’ market values are similar to COTY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MASI 27 200916 -1
NWL 29 1434678 0
CEA 1 657 0
MOS 17 682952 -11
Average 18.5 579801 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $139 million in COTY’s case. Newell Brands Inc. (NASDAQ:NWL) is the most popular stock in this table. On the other hand China Eastern Airlines Corporation Limited (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. Coty Inc (NYSE:COTY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on COTY as the stock returned 10.9% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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