The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Fossil Group Inc (NASDAQ:FOSL), and what that likely means for the prospects of the company and its stock.
Fossil Group Inc (NASDAQ:FOSL) has seen a decrease in support from the world’s most elite money managers in recent months. FOSL was in 17 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with FOSL positions at the end of the previous quarter. Our calculations also showed that FOSL 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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the new hedge fund action encompassing Fossil Group Inc (NASDAQ:FOSL).
What does the smart money think about Fossil Group Inc (NASDAQ:FOSL)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2018. On the other hand, there were a total of 17 hedge funds with a bullish position in FOSL a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Fossil Group Inc (NASDAQ:FOSL) was held by Renaissance Technologies, which reported holding $27.7 million worth of stock at the end of March. It was followed by D E Shaw with a $17.2 million position. Other investors bullish on the company included Gotham Asset Management, Arrowstreet Capital, and Citadel Investment Group.
Seeing as Fossil Group Inc (NASDAQ:FOSL) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Matt Sirovich and Jeremy Mindich’s Scopia Capital said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $6.2 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dumped about $2.6 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Fossil Group Inc (NASDAQ:FOSL). We will take a look at Sabine Royalty Trust (NYSE:SBR), Rayonier Advanced Materials Inc (NYSE:RYAM), TG Therapeutics Inc (NASDAQ:TGTX), and Luxfer Holdings PLC (NYSE:LXFR). This group of stocks’ market valuations are closest to FOSL’s market valuation.
Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position
SBR,6,24252,0
RYAM,24,142317,5
TGTX,17,182420,2
LXFR,14,115224,2
Average,15.25,116053,2.25
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $80 million in FOSL’s case. Rayonier Advanced Materials Inc (NYSE:RYAM) is the most popular stock in this table. On the other hand Sabine Royalty Trust (NYSE:SBR) is the least popular one with only 6 bullish hedge fund positions. Fossil Group Inc (NASDAQ:FOSL) 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 FOSL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FOSL were disappointed as the stock returned -27.9% 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.
