You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Chico’s FAS, Inc. (NYSE:CHS) investors should be aware of an increase in hedge fund sentiment recently. CHS was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. There were 14 hedge funds in our database with CHS positions at the end of the previous quarter. Our calculations also showed that CHS isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a gander at the latest hedge fund action regarding Chico’s FAS, Inc. (NYSE:CHS).
What does smart money think about Chico’s FAS, Inc. (NYSE:CHS)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in CHS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Chico’s FAS, Inc. (NYSE:CHS) was held by Renaissance Technologies, which reported holding $26.9 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $11.8 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Citadel Investment Group.
As one would reasonably expect, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the largest position in Chico’s FAS, Inc. (NYSE:CHS). Citadel Investment Group had $3.3 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Chuck Royce’s Royce & Associates, Jonathan Soros’s JS Capital, and Jeffrey Talpins’s Element Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Chico’s FAS, Inc. (NYSE:CHS) but similarly valued. These stocks are Intrepid Potash, Inc. (NYSE:IPI), Mesoblast Limited (NASDAQ:MESO), Crawford & Company (NYSE:CRD), and Peoples Utah Bancorp (NASDAQ:PUB). This group of stocks’ market valuations are similar to CHS’s market valuation.
|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 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $58 million in CHS’s case. Intrepid Potash, Inc. (NYSE:IPI) is the most popular stock in this table. On the other hand Mesoblast Limited (NASDAQ:MESO) is the least popular one with only 1 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CHS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CHS were disappointed as the stock returned -22.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.