Were These Hedge Funds Wrong About Betting On Macy’s, Inc. (M)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Macy’s, Inc. (NYSE:M).

Macy’s, Inc. (NYSE:M) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. Macy’s, Inc. (NYSE:M) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistics is 67. There were 30 hedge funds in our database with M positions at the end of the first quarter. Our calculations also showed that M 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).

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

In the eyes of most shareholders, hedge funds are seen as underperforming, outdated investment tools of years past. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the moguls of this group, approximately 850 funds. These hedge fund managers manage bulk of the hedge fund industry’s total asset base, and by keeping track of their best picks, Insider Monkey has determined a few investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun 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 .


Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover 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 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. Keeping this in mind let’s take a glance at the latest hedge fund action encompassing Macy’s, Inc. (NYSE:M).

Hedge fund activity in Macy’s, Inc. (NYSE:M)

At Q2’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in M over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Macy’s, Inc. (NYSE:M) was held by Yacktman Asset Management, which reported holding $233.3 million worth of stock at the end of June. It was followed by Contrarius Investment Management with a $63.5 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position Contrarius Investment Management allocated the biggest weight to Macy’s, Inc. (NYSE:M), around 6% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, dishing out 3.72 percent of its 13F equity portfolio to M.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, initiated the largest position in Macy’s, Inc. (NYSE:M). Steadfast Capital Management had $15.8 million invested in the company at the end of the quarter. OZ Management also made a $8.3 million investment in the stock during the quarter. The following funds were also among the new M investors: Lee Ainslie’s Maverick Capital, Dmitry Balyasny’s Balyasny Asset Management, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Macy’s, Inc. (NYSE:M) but similarly valued. We will take a look at GATX Corporation (NYSE:GATX), Investors Bancorp, Inc. (NASDAQ:ISBC), AMN Healthcare Services Inc (NYSE:AMN), Triton International Limited (NYSE:TRTN), Assured Guaranty Ltd. (NYSE:AGO), Murphy Oil Corporation (NYSE:MUR), and Patterson Companies, Inc. (NASDAQ:PDCO). This group of stocks’ market caps resemble M’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GATX 17 152806 4
ISBC 25 127448 -1
AMN 21 61749 -1
TRTN 14 44903 2
AGO 25 218746 -3
MUR 15 86330 -5
PDCO 22 126336 5
Average 19.9 116903 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $412 million in M’s case. Investors Bancorp, Inc. (NASDAQ:ISBC) is the most popular stock in this table. On the other hand Triton International Limited (NYSE:TRTN) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Macy’s, Inc. (NYSE:M) is more popular among hedge funds. Our overall hedge fund sentiment score for M is 76.1. 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 gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Unfortunately M wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on M were disappointed as the stock returned -9.7% since the end of the second quarter (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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