Should You Buy Guess?, Inc. (GES)?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Guess?, Inc. (NYSE:GES) investors should pay attention to an increase in enthusiasm from smart money recently. GES was in 15 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with GES positions at the end of the previous quarter. 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 Petrobras Argentina SA ADR (NYSE:PZE), Alliance Holdings GP, L.P. (NASDAQ:AHGP), and Acceleron Pharma Inc (NASDAQ:XLRN) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Guess?, Inc. (NYSE:GES)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 36% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards GES over the last 5 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jim Simons’ Renaissance Technologies has the largest position in Guess?, Inc. (NYSE:GES), worth close to $14.7 million. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $11.5 million position. Some other hedge funds and institutional investors that are bullish include Chuck Royce’s Royce & Associates, and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, key hedge funds have been driving this bullishness. Israel Englander’s Millennium Management established the most valuable position in Guess?, Inc. (NYSE:GES). Millennium Management had $6.2 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $3.5 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group, and Matthew Tewksbury’s Stevens Capital Management.

Let’s check out hedge fund activity in other stocks similar to Guess?, Inc. (NYSE:GES). These stocks are Petrobras Argentina SA ADR (NYSE:PZE), Alliance Holdings GP, L.P. (NASDAQ:AHGP), Acceleron Pharma Inc (NASDAQ:XLRN), and The Buckle, Inc. (NYSE:BKE). This group of stocks’ market valuations are closest to GES’s market valuation.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $63 million in GES’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand Alliance Holdings GP, L.P. (NASDAQ:AHGP) is the least popular one with only 4 bullish hedge fund positions. Guess?, Inc. (NYSE:GES) 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 XLRN might be a better candidate to consider taking a long position in.

Disclosure: None