Were Hedge Funds Right About Loading Up On Abercrombie & Fitch Co. (ANF)?

In this article you are going to find out whether hedge funds think Abercrombie & Fitch Co. (NYSE:ANF) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Abercrombie & Fitch Co. (NYSE:ANF) a buy here? Prominent investors were betting on the stock. The number of bullish hedge fund positions inched up by 11 lately. Abercrombie & Fitch Co. (NYSE:ANF) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ANF 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). There were 23 hedge funds in our database with ANF holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most market participants, hedge funds are assumed to be underperforming, outdated investment tools of the past. While there are over 8000 funds in operation today, Our experts choose to focus on the crème de la crème of this club, approximately 850 funds. These hedge fund managers manage the majority of the smart money’s total asset base, and by shadowing their best stock picks, Insider Monkey has spotted a number of investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. 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 analyze the fresh hedge fund action encompassing Abercrombie & Fitch Co. (NYSE:ANF).

Hedge fund activity in Abercrombie & Fitch Co. (NYSE:ANF)

At Q2’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 48% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in ANF a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is ANF A Good Stock To Buy?

Among these funds, Prentice Capital Management held the most valuable stake in Abercrombie & Fitch Co. (NYSE:ANF), which was worth $40.4 million at the end of the third quarter. On the second spot was Paradice Investment Management which amassed $31.3 million worth of shares. Rima Senvest Management, Arrowstreet Capital, and Divisar 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 Prentice Capital Management allocated the biggest weight to Abercrombie & Fitch Co. (NYSE:ANF), around 14.92% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, dishing out 4.22 percent of its 13F equity portfolio to ANF.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Abercrombie & Fitch Co. (NYSE:ANF) headfirst. Rima Senvest Management, managed by Richard Mashaal, established the largest position in Abercrombie & Fitch Co. (NYSE:ANF). Rima Senvest Management had $16.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $7.7 million position during the quarter. The other funds with brand new ANF positions are Anand Parekh’s Alyeska Investment Group, Greg Eisner’s Engineers Gate Manager, and Steve Cohen’s Point72 Asset Management.

Let’s now review hedge fund activity in other stocks similar to Abercrombie & Fitch Co. (NYSE:ANF). These stocks are RPC, Inc. (NYSE:RES), NV5 Global Inc (NASDAQ:NVEE), Northern Dynasty Minerals Ltd. (NYSE:NAK), Meredith Corporation (NYSE:MDP), Pampa Energia S.A. (NYSE:PAM), TPG RE Finance Trust, Inc. (NYSE:TRTX), and IMAX Corporation (NYSE:IMAX). This group of stocks’ market valuations are closest to ANF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RES 16 27399 5
NVEE 7 11276 -2
NAK 10 23661 5
MDP 20 174786 4
PAM 10 33729 3
TRTX 14 81771 -3
IMAX 19 64964 2
Average 13.7 59655 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $185 million in ANF’s case. Meredith Corporation (NYSE:MDP) is the most popular stock in this table. On the other hand NV5 Global Inc (NASDAQ:NVEE) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. Our overall hedge fund sentiment score for ANF is 90. 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 returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on ANF as the stock returned 33.6% since the end of June (through 10/30) 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.