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Is Foot Locker, Inc. (FL) Going to Burn These Hedge Funds?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the first 6 weeks of the fourth quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Foot Locker, Inc. (NYSE:FL) to find out whether it was one of their high conviction long-term ideas.

Foot Locker, Inc. (NYSE:FL) investors should be aware of a decrease in hedge fund interest in recent months. FL was in 26 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with FL holdings at the end of the previous quarter. Our calculations also showed that fl isn’t among the 30 most popular stocks among hedge funds.

According to most investors, hedge funds are perceived as unimportant, outdated investment tools of years past. While there are over 8,000 funds with their doors open today, Our researchers look at the aristocrats of this club, about 700 funds. Most estimates calculate that this group of people orchestrate bulk of all hedge funds’ total asset base, and by watching their first-class stock picks, Insider Monkey has determined several investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Dmitry Balyasny

Let’s view the key hedge fund action regarding Foot Locker, Inc. (NYSE:FL).

How have hedgies been trading Foot Locker, Inc. (NYSE:FL)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the second quarter of 2018. By comparison, 34 hedge funds held shares or bullish call options in FL heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with FL Positions

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Foot Locker, Inc. (NYSE:FL). AQR Capital Management has a $124.5 million position in the stock, comprising 0.1% of its 13F portfolio. On AQR Capital Management’s heels is Ken Griffin of Citadel Investment Group, with a $45.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism comprise Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.

Due to the fact that Foot Locker, Inc. (NYSE:FL) has witnessed declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies who sold off their full holdings last quarter. It’s worth mentioning that Karthik Sarma’s SRS Investment Management said goodbye to the biggest investment of the 700 funds watched by Insider Monkey, worth an estimated $63.8 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also said goodbye to its stock, about $48.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Foot Locker, Inc. (NYSE:FL). We will take a look at HubSpot Inc (NYSE:HUBS), CIT Group Inc. (NYSE:CIT), Brunswick Corporation (NYSE:BC), and Genpact Limited (NYSE:G). This group of stocks’ market caps are closest to FL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUBS 21 440876 -1
CIT 25 899403 -1
BC 34 794302 4
G 21 547304 0
Average 25.25 670471 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $670 million. That figure was $465 million in FL’s case. Brunswick Corporation (NYSE:BC) is the most popular stock in this table. On the other hand HubSpot Inc (NYSE:HUBS) is the least popular one with only 21 bullish hedge fund positions. Foot Locker, Inc. (NYSE:FL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BC might be a better candidate to consider a long position.

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

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