How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Hibbett Sports, Inc. (NASDAQ:HIBB).
Is HIBB a good stock to buy now? Hibbett Sports, Inc. (NASDAQ:HIBB) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of September. Our calculations also showed that HIBB 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). 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 Sculptor Capital Management, Inc. (NYSE:SCU), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), and Frequency Therapeutics, Inc. (NASDAQ:FREQ) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 check out the new hedge fund action regarding Hibbett Sports, Inc. (NASDAQ:HIBB).
Do Hedge Funds Think HIBB Is A Good Stock To Buy Now?
At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in HIBB a year ago. So, let’s examine 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, Thomas E. Claugus’s GMT Capital has the largest position in Hibbett Sports, Inc. (NASDAQ:HIBB), worth close to $50.4 million, accounting for 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $29.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Hibbett Sports, Inc. (NASDAQ:HIBB), around 3.66% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to HIBB.
Judging by the fact that Hibbett Sports, Inc. (NASDAQ:HIBB) has witnessed bearish sentiment from hedge fund managers, logic holds that there exists a select few fund managers who sold off their full holdings in the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $6.9 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Hibbett Sports, Inc. (NASDAQ:HIBB). These stocks are Sculptor Capital Management, Inc. (NYSE:SCU), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), Frequency Therapeutics, Inc. (NASDAQ:FREQ), Crescent Point Energy Corp (NYSE:CPG), HighPeak Energy, Inc. (NASDAQ:HPK), Kearny Financial Corp. (NASDAQ:KRNY), and Bristow Group, Inc. (NYSE:VTOL). This group of stocks’ market valuations match HIBB’s market valuation.
|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 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $182 million in HIBB’s case. Kearny Financial Corp. (NASDAQ:KRNY) is the most popular stock in this table. On the other hand HighPeak Energy, Inc. (NASDAQ:HPK) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Hibbett Sports, Inc. (NASDAQ:HIBB) is more popular among hedge funds. Our overall hedge fund sentiment score for HIBB is 85. 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 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on HIBB as the stock returned 11.7% since the end of September (through 12/14) 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.
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Disclosure: None. This article was originally published at Insider Monkey.