Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Deckers Outdoor Corp (NYSE:DECK).
Is DECK a good stock to buy now? Deckers Outdoor Corp (NYSE:DECK) was in 54 hedge funds’ portfolios at the end of September. The all time high for this statistics is 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. DECK investors should be aware of an increase in enthusiasm from smart money recently. There were 47 hedge funds in our database with DECK positions at the end of the second quarter. Our calculations also showed that DECK 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium 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. Now let’s go over the new hedge fund action encompassing Deckers Outdoor Corp (NYSE:DECK).
How have hedgies been trading Deckers Outdoor Corp (NYSE:DECK)?
At the end of the third quarter, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DECK over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Steadfast Capital Management was the largest shareholder of Deckers Outdoor Corp (NYSE:DECK), with a stake worth $147.1 million reported as of the end of September. Trailing Steadfast Capital Management was Melvin Capital Management, which amassed a stake valued at $104.5 million. AQR Capital Management, Woodson Capital Management, and Samlyn Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Miura Global Management allocated the biggest weight to Deckers Outdoor Corp (NYSE:DECK), around 5.67% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, earmarking 5.54 percent of its 13F equity portfolio to DECK.
With a general bullishness amongst the heavyweights, some big names have jumped into Deckers Outdoor Corp (NYSE:DECK) headfirst. Coatue Management, managed by Philippe Laffont, established the biggest position in Deckers Outdoor Corp (NYSE:DECK). Coatue Management had $59 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $30 million investment in the stock during the quarter. The other funds with new positions in the stock are Gavin Baker’s Atreides Management, Steven Boyd’s Armistice Capital, and Louis Bacon’s Moore Global Investments.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Deckers Outdoor Corp (NYSE:DECK) but similarly valued. These stocks are BanColombia S.A. (NYSE:CIB), Toll Brothers Inc (NYSE:TOL), WEX Inc (NYSE:WEX), Ciena Corporation (NYSE:CIEN), Arrow Electronics, Inc. (NYSE:ARW), Bruker Corporation (NASDAQ:BRKR), and Proofpoint Inc (NASDAQ:PFPT). This group of stocks’ market values are similar to DECK’s market value.
|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 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $359 million. That figure was $1097 million in DECK’s case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Deckers Outdoor Corp (NYSE:DECK) is more popular among hedge funds. Our overall hedge fund sentiment score for DECK is 90. 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 returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on DECK as the stock returned 22.4% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.