Investors Like The Gap Inc. (GPS) More Than Hanesbrands Inc. (HBI)

Is Hanesbrands Inc. (NYSE:HBI) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2-and-20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Hanesbrands Inc. (NYSE:HBI) worth your attention right now? The smart money is taking a bearish view. The number of bullish hedge fund positions decreased by two lately. Hanesbrands was in 32 hedge funds’ portfolios at the end of the third quarter of 2015. There were 34 hedge funds in our database with Hanesbrands holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as The Gap Inc. (NYSE:GPS), Liberty Media Corp (NASDAQ:LMCK), and Whirlpool Corporation (NYSE:WHR) to gather more data points.

To the average investor, there are tons of indicators investors use to evaluate publicly traded companies. Two of the best indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a solid amount (see the details here).

With all of this in mind, we’re going to analyze the key action encompassing Hanesbrands Inc. (NYSE:HBI).

How have hedgies been trading Hanesbrands Inc. (NYSE:HBI)?

Heading into Q4, a total of 32 of the hedge funds tracked by Insider Monkey were long in this stock, a decline of 6% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, John Shapiro’s Chieftain Capital has the number one position in Hanesbrands Inc. (NYSE:HBI), worth close to $266.3 million, corresponding to 13.5% of its total 13F portfolio. Sitting in the number two spot is Lone Pine Capital, managed by Stephen Mandel, which holds a $222.5 million position; 0.9% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include David Gallo’s Valinor Management LLC, Alexander Mitchell’s Scopus Asset Management, and Robert Boucai’s Newbrook Capital Advisors.

Seeing as Hanesbrands Inc. (NYSE:HBI) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $63.3 million in stock. Clifford Fox’s fund, Columbus Circle Investors, also said goodbye to its stock, about $40.9 million worth. These moves are interesting, as aggregate hedge fund interest was cut by two funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hanesbrands Inc. (NYSE:HBI) but similarly valued. These stocks are The Gap Inc. (NYSE:GPS), Liberty Media Corp (NASDAQ:LMCK), Whirlpool Corporation (NYSE:WHR), and Equifax Inc. (NYSE:EFX). This group of stocks’ market values resemble HBI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GPS 34 773243 13
LMCK 39 1943732 7
WHR 37 1866682 0
EFX 35 439297 6

As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.26 billion. That figure was $1.07 billion in HBI’s case, which is a red flag given the fact that it’s below average. Clearly, Liberty Media Corp (NASDAQ:LMCK) is the most popular stock in this table, while The Gap Inc. (NYSE:GPS) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Hanesbrands Inc. (NYSE:HBI) is even less popular than The Gap Taking all these factors into consideration, it may be a good idea to analyze Hanesbrands in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think Hanesbrands is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.