Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 mid-cap stocks among the best performing hedge funds in our database yielded an average return of 18% during the last 12 months, outperforming the S&P 500 Index funds by double digits. Although the elite funds occasionally have their duds, such as SunEdison and Valeant, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Coty Inc (NYSE:COTY).
Is Coty Inc (NYSE:COTY) going to take off soon? Investors who are in the know seem to be in a bullish mood, judging by the fact that the number of investors long the stock surged by 33 in the third quarter. In this way, 46 funds from our database reported holding shares of Coty as of the end of September. However, 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 Arch Capital Group Ltd. (NASDAQ:ACGL), Newfield Exploration Co. (NYSE:NFX), and Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, we’re going to take a look at the recent action surrounding Coty Inc (NYSE:COTY).
How are hedge funds trading Coty Inc (NYSE:COTY)?
Heading into the fourth quarter of 2016, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 254% from the end of June. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management holds the biggest position in Coty Inc (NYSE:COTY). Millennium Management has a $1.28 billion position in the stock, comprising 2.1% of its 13F portfolio. Sitting at the No. 2 spot is Pentwater Capital Management, managed by Matthew Halbower, which holds a $173.8 million position; 1.6% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions consist of Benjamin A. Smith’s Laurion Capital Management, Ric Dillon’s Diamond Hill Capital and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. The majority of these top holders initiated stakes during the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Coty Inc (NYSE:COTY) but similarly valued. We will take a look at Arch Capital Group Ltd. (NASDAQ:ACGL), Newfield Exploration Co. (NYSE:NFX), Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY), and Michael Kors Holdings Ltd (NYSE:KORS). This group of stocks’ market caps are closest to COTY’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 26 funds with bullish positions at the end of September and the average amount invested in these stocks was $639 million, which is significantly lower than the $3.03 billion in COTY’s case. Newfield Exploration Co. (NYSE:NFX) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) is the least popular one with only nine investors holding shares. Compared to these stocks Coty Inc (NYSE:COTY) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.