Urban Outfitters, Inc. (URBN): Are Hedge Funds Right About This Stock?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Urban Outfitters, Inc. (NASDAQ:URBN).

Urban Outfitters, Inc. (NASDAQ:URBN) has experienced an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that URBN isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

We’re going to take a look at the latest hedge fund action encompassing Urban Outfitters, Inc. (NASDAQ:URBN).

How have hedgies been trading Urban Outfitters, Inc. (NASDAQ:URBN)?

Heading into the fourth quarter of 2018, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in URBN over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Two Sigma Advisors was the largest shareholder of Urban Outfitters, Inc. (NASDAQ:URBN), with a stake worth $68.1 million reported as of the end of September. Trailing Two Sigma Advisors was Columbus Circle Investors, which amassed a stake valued at $57.3 million. Citadel Investment Group, GLG Partners, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, created the biggest position in Urban Outfitters, Inc. (NASDAQ:URBN). Holocene Advisors had $27.8 million invested in the company at the end of the quarter. David Keidan’s Buckingham Capital Management also initiated a $2.7 million position during the quarter. The following funds were also among the new URBN investors: Julian Robertson’s Tiger Management, Matthew Hulsizer’s PEAK6 Capital Management, and George Hall’s Clinton Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Urban Outfitters, Inc. (NASDAQ:URBN) but similarly valued. We will take a look at BRF S.A. (NYSE:BRFS), Ciena Corporation (NYSE:CIEN), Skechers USA Inc (NYSE:SKX), and JBG SMITH Properties (NYSE:JBGS). This group of stocks’ market values are similar to URBN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BRFS 10 50558 0
CIEN 25 327955 7
SKX 20 235713 -4
JBGS 17 280134 2
Average 18 223590 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $426 million in URBN’s case. Ciena Corporation (NYSE:CIEN) is the most popular stock in this table. On the other hand BRF Brasil Foods SA (NYSE:BRFS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Urban Outfitters, Inc. (NASDAQ:URBN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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