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Is The Gap Inc. (GPS) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about The Gap Inc. (NYSE:GPS)?

The Gap Inc. (NYSE:GPS) has seen a decrease in hedge fund sentiment in recent months. GPS was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 31 hedge funds in our database with GPS holdings at the end of the previous quarter. Our calculations also showed that GPS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the eyes of most shareholders, hedge funds are seen as slow, outdated investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, Our researchers hone in on the moguls of this club, approximately 850 funds. It is estimated that this group of investors manage bulk of the hedge fund industry’s total asset base, and by observing their best equity investments, Insider Monkey has unearthed a few investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the recent hedge fund action surrounding The Gap Inc. (NYSE:GPS).

How are hedge funds trading The Gap Inc. (NYSE:GPS)?

Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the fourth quarter of 2019. On the other hand, there were a total of 27 hedge funds with a bullish position in GPS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in The Gap Inc. (NYSE:GPS), which was worth $10.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $10.6 million worth of shares. Gotham Asset Management, Holocene Advisors, and Arrowstreet 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 Invenomic Capital Management allocated the biggest weight to The Gap Inc. (NYSE:GPS), around 0.63% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, setting aside 0.43 percent of its 13F equity portfolio to GPS.

Since The Gap Inc. (NYSE:GPS) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their positions entirely heading into Q4. Interestingly, Benjamin A. Smith’s Laurion Capital Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, totaling close to $8.4 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund cut about $8.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Gap Inc. (NYSE:GPS) but similarly valued. We will take a look at Kirby Corporation (NYSE:KEX), The Brink’s Company (NYSE:BCO), OneMain Holdings Inc (NYSE:OMF), and Synovus Financial Corp. (NYSE:SNV). All of these stocks’ market caps are similar to GPS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KEX 21 288290 -5
BCO 24 275433 0
OMF 34 221371 -5
SNV 33 228467 -2
Average 28 253390 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $49 million in GPS’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Kirby Corporation (NYSE:KEX) is the least popular one with only 21 bullish hedge fund positions. The Gap Inc. (NYSE:GPS) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on GPS as the stock returned 62.7% during the second quarter and outperformed the market by an even larger margin.

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