Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Crocs, Inc. (NASDAQ: CROX ) changed recently.
Is Crocs, Inc. (NASDAQ: CROX ) a buy here? The smart money is selling. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that CROX isn't among the 30 most popular stocks among hedge funds .
Today there are plenty of formulas shareholders use to analyze publicly traded companies. A pair of the most useful formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform their index-focused peers by a superb margin ( see the details here ).
Let's check out the new hedge fund action regarding Crocs, Inc. (NASDAQ: CROX ).
How are hedge funds trading Crocs, Inc. (NASDAQ:CROX)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2018. On the other hand, there were a total of 17 hedge funds with a bullish position in CROX a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons's Renaissance Technologies has the largest position in Crocs, Inc. (NASDAQ:CROX), worth close to $86 million, corresponding to 0.1% of its total 13F portfolio. On Renaissance Technologies's heels is D. E. Shaw of D E Shaw , with a $60.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish include Paul Marshall and Ian Wace's Marshall Wace LLP , John Overdeck and David Siegel's Two Sigma Advisors and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital .
Seeing as Crocs, Inc. (NASDAQ:CROX) has faced a decline in interest from the smart money, we can see that there is a sect of fund managers that decided to sell off their entire stakes last quarter. Intriguingly, Minhua Zhang's Weld Capital Management said goodbye to the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising close to $1.8 million in stock. Guy Shahar's fund, DSAM Partners , also dropped its stock, about $1.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Crocs, Inc. (NASDAQ:CROX). We will take a look at Capitol Federal Financial, Inc. (NASDAQ: CFFN ), SPS Commerce, Inc. (NASDAQ: SPSC ), Plexus Corp. (NASDAQ: PLXS ), and Scientific Games Corp (NASDAQ: SGMS ). This group of stocks' market caps resemble CROX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CFFN,11,157223,2 SPSC,19,175243,0 PLXS,9,49518,-5 SGMS,28,604918,2 Average,16.75,246726,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $394 million in CROX's case. Scientific Games Corp (NASDAQ: SGMS ) is the most popular stock in this table. On the other hand Plexus Corp. (NASDAQ: PLXS ) is the least popular one with only 9 bullish hedge fund positions. Crocs, Inc. (NASDAQ:CROX) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CROX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CROX were disappointed as the stock returned -23.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey .