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Is Gildan Activewear Inc (GIL) A Good Stock To Invest In?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gildan Activewear Inc (NYSE:GIL) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Gildan Activewear Inc (NYSE:GIL) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of June. Our calculations also showed that GIL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 Aaron’s, Inc. (NYSE:AAN), Balchem Corporation (NASDAQ:BCPC), and TechnipFMC plc (NYSE:FTI) to gather more data points. Our calculations also showed that GIL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to go over the latest hedge fund action regarding Gildan Activewear Inc (NYSE:GIL).

How are hedge funds trading Gildan Activewear Inc (NYSE:GIL)?

At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GIL over the last 20 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the biggest position in Gildan Activewear Inc (NYSE:GIL), worth close to $288.8 million, accounting for 1.9% of its total 13F portfolio. Sitting at the No. 2 spot is Coliseum Capital, led by Christopher Shackelton and Adam Gray, holding a $65.3 million position; 9.5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of D. E. Shaw’s D E Shaw, Prem Watsa’s Fairfax Financial Holdings and Joseph Sirdevan’s Galibier Capital Management. In terms of the portfolio weights assigned to each position Gratia Capital allocated the biggest weight to Gildan Activewear Inc (NYSE:GIL), around 12.49% of its 13F portfolio. Coliseum Capital is also relatively very bullish on the stock, earmarking 9.53 percent of its 13F equity portfolio to GIL.

Judging by the fact that Gildan Activewear Inc (NYSE:GIL) has faced declining sentiment from the smart money, it’s easy to see that there exists a select few hedge funds that decided to sell off their full holdings in the second quarter. At the top of the heap, Michael Doheny’s Freshford Capital Management dumped the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $5.5 million in stock, and William Hyatt’s Hudson Way Capital Management was right behind this move, as the fund sold off about $4.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gildan Activewear Inc (NYSE:GIL) but similarly valued. These stocks are Aaron’s, Inc. (NYSE:AAN), Balchem Corporation (NASDAQ:BCPC), TechnipFMC plc (NYSE:FTI), PNM Resources, Inc. (NYSE:PNM), Ardagh Group S.A. (NYSE:ARD), Axsome Therapeutics, Inc. (NASDAQ:AXSM), and Intercorp Financial Services Inc. (NYSE:IFS). All of these stocks’ market caps are similar to GIL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAN 27 334862 2
BCPC 17 77576 4
FTI 31 528796 2
PNM 25 359323 3
ARD 7 53702 -1
AXSM 31 552366 7
IFS 2 29824 0
Average 20 276636 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $432 million in GIL’s case. TechnipFMC plc (NYSE:FTI) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 2 bullish hedge fund positions. Gildan Activewear Inc (NYSE:GIL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GIL is 63.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on GIL as the stock returned 27% during Q3 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.