Is Callaway Golf Company (ELY) A Good Stock To Buy?

The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Callaway Golf Company (NYSE:ELY) based on those filings.

Callaway Golf Company (NYSE:ELY) was in 20 hedge funds’ portfolios at the end of June. ELY shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 26 hedge funds in our database with ELY positions at the end of the previous quarter. Our calculations also showed that ELY isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Barry Rosenstein JANA PARTNERS

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the key hedge fund action regarding Callaway Golf Company (NYSE:ELY).

What does smart money think about Callaway Golf Company (NYSE:ELY)?

At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ELY over the last 16 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.

No of Hedge Funds with ELY Positions

Of the funds tracked by Insider Monkey, JANA Partners, managed by Barry Rosenstein, holds the biggest position in Callaway Golf Company (NYSE:ELY). JANA Partners has a $148.8 million position in the stock, comprising 12.4% of its 13F portfolio. Coming in second is 13D Management, led by Kenneth Squire, holding a $12.7 million position; 3.8% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish encompass Paul Marshall and Ian Wace’s Marshall Wace LLP, Douglas Dethy’s DC Capital Partners and Kerr Neilson’s Platinum Asset Management.

Due to the fact that Callaway Golf Company (NYSE:ELY) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that elected to cut their entire stakes by the end of the second quarter. Interestingly, Mariko Gordon’s Daruma Asset Management dumped the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $24.9 million in stock, and Brian Gustavson and Andrew Haley’s 1060 Capital Management was right behind this move, as the fund cut about $16.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Callaway Golf Company (NYSE:ELY) but similarly valued. We will take a look at Trinseo S.A. (NYSE:TSE), Federal Signal Corporation (NYSE:FSS), Axos Financial, Inc. (NYSE:AX), and NBT Bancorp Inc. (NASDAQ:NBTB). This group of stocks’ market values are closest to ELY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSE 23 115515 4
FSS 20 52902 0
AX 14 49005 1
NBTB 8 10119 2
Average 16.25 56885 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $216 million in ELY’s case. Trinseo S.A. (NYSE:TSE) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 8 bullish hedge fund positions. Callaway Golf Company (NYSE:ELY) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ELY as the stock returned 13.2% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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