Were Hedge Funds Right About Piling Into Callaway Golf Company (ELY)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Callaway Golf Company (NYSE:ELY).

Is Callaway Golf Company (NYSE:ELY) a sound investment today? The best stock pickers were betting on the stock. The number of long hedge fund bets advanced by 8 recently. Callaway Golf Company (NYSE:ELY) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ELY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 32 hedge funds in our database with ELY holdings at the end of September.

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 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Ken Fisher of Fisher Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a look at the fresh hedge fund action regarding Callaway Golf Company (NYSE:ELY).

Do Hedge Funds Think ELY Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the third quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in ELY a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of Callaway Golf Company (NYSE:ELY), with a stake worth $86.7 million reported as of the end of December. Trailing Fisher Asset Management was Cadian Capital, which amassed a stake valued at $83.8 million. Nitorum Capital, Woodson Capital Management, and Citadel Investment Group 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 Marlowe Partners allocated the biggest weight to Callaway Golf Company (NYSE:ELY), around 8.78% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, earmarking 8.31 percent of its 13F equity portfolio to ELY.

Now, specific money managers were leading the bulls’ herd. Woodson Capital Management, managed by James Woodson Davis, initiated the biggest position in Callaway Golf Company (NYSE:ELY). Woodson Capital Management had $42.9 million invested in the company at the end of the quarter. Malcolm Levine’s Dendur Capital also initiated a $34.9 million position during the quarter. The following funds were also among the new ELY investors: David Steinberg and Eric Udoff’s Marlowe Partners, Jack Ripsteen’s Potrero Capital Research, and David MacKnight’s One Fin Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Callaway Golf Company (NYSE:ELY) but similarly valued. These stocks are iRobot Corporation (NASDAQ:IRBT), Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), Plexus Corp. (NASDAQ:PLXS), Stoke Therapeutics, Inc. (NASDAQ:STOK), Fluor Corporation (NYSE:FLR), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Seres Therapeutics Inc (NASDAQ:MCRB). This group of stocks’ market valuations resemble ELY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRBT 22 167299 -3
IBA 2 33488 -1
PLXS 17 76950 -5
STOK 13 320293 4
FLR 20 148683 3
BBBY 33 535284 1
MCRB 17 396225 5
Average 17.7 239746 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $489 million in ELY’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Callaway Golf Company (NYSE:ELY) is more popular among hedge funds. Our overall hedge fund sentiment score for ELY 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on ELY as the stock returned 20.6% since the end of December (through 4/30) 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.

Follow Topgolf Callaway Brands Corp. (NYSE:MODG)

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