Is CHWY A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. What do these smart investors think about Chewy, Inc. (NYSE:CHWY)?

Is CHWY a good stock to buy now? Chewy, Inc. (NYSE:CHWY) shareholders have witnessed an increase in enthusiasm from smart money recently. Chewy, Inc. (NYSE:CHWY) was in 46 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 44 hedge funds in our database with CHWY positions at the end of the second quarter. Our calculations also showed that CHWY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Glen Kacher of Light Street Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the latest hedge fund action surrounding Chewy, Inc. (NYSE:CHWY).

Do Hedge Funds Think CHWY Is A Good Stock To Buy Now?

At Q3’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the second quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in CHWY a year ago. 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, Tybourne Capital Management, managed by Eashwar Krishnan, holds the most valuable position in Chewy, Inc. (NYSE:CHWY). Tybourne Capital Management has a $91.3 million position in the stock, comprising 2.2% of its 13F portfolio. The second most bullish fund manager is Zevenbergen Capital Investments, managed by Nancy Zevenbergen, which holds a $82 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Ken Griffin’s Citadel Investment Group, Glen Kacher’s Light Street Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Rip Road Capital allocated the biggest weight to Chewy, Inc. (NYSE:CHWY), around 7.65% of its 13F portfolio. Berylson Capital Partners is also relatively very bullish on the stock, designating 4.48 percent of its 13F equity portfolio to CHWY.

As industrywide interest jumped, some big names have jumped into Chewy, Inc. (NYSE:CHWY) headfirst. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, created the biggest position in Chewy, Inc. (NYSE:CHWY). Senator Investment Group had $27.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $19.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew L Pinz’s Pinz Capital, Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chewy, Inc. (NYSE:CHWY) but similarly valued. We will take a look at Nokia Corporation (NYSE:NOK), GoodRx Holdings, Inc. (NASDAQ:GDRX), Barclays PLC (NYSE:BCS), Dollar Tree, Inc. (NASDAQ:DLTR), Tyson Foods, Inc. (NYSE:TSN), Schlumberger Limited. (NYSE:SLB), and Corteva, Inc. (NYSE:CTVA). This group of stocks’ market values are closest to CHWY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NOK 21 173335 -5
GDRX 41 698252 41
BCS 6 34848 -2
DLTR 50 1912733 -10
TSN 36 618426 -1
SLB 53 1030051 0
CTVA 36 1058371 -3
Average 34.7 789431 2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $789 million. That figure was $485 million in CHWY’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 6 bullish hedge fund positions. Chewy, Inc. (NYSE:CHWY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHWY is 79.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on CHWY as the stock returned 44.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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