At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Movado Group, Inc (NYSE:MOV) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Movado Group, Inc (NYSE:MOV) a buy right now? The smart money was getting more bullish. The number of bullish hedge fund bets went up by 1 recently. Our calculations also showed that MOV isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_731890" align="aligncenter" width="396"] John Rogers of Ariel Investments[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's check out the fresh hedge fund action encompassing Movado Group, Inc (NYSE:MOV).
How are hedge funds trading Movado Group, Inc (NYSE:MOV)?
Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in MOV a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Contrarius Investment Management held the most valuable stake in Movado Group, Inc (NYSE:MOV), which was worth $5 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $1.8 million worth of shares. Royce & Associates, GAMCO Investors, and Arrowstreet 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 Contrarius Investment Management allocated the biggest weight to Movado Group, Inc (NYSE:MOV), around 0.64% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to MOV.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Movado Group, Inc (NYSE:MOV) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Movado Group, Inc (NYSE:MOV). Arrowstreet Capital had $0.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Greg Eisner's Engineers Gate Manager, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Movado Group, Inc (NYSE:MOV) but similarly valued. We will take a look at SCVX Corp. (NYSE:SCVX), Vishay Precision Group Inc (NYSE:VPG), Brightcove Inc (NASDAQ:BCOV), and Cytosorbents Corp (NASDAQ:CTSO). All of these stocks' market caps are similar to MOV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCVX,14,84898,14 VPG,15,90910,-2 BCOV,18,102312,0 CTSO,9,12459,4 Average,14,72645,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $14 million in MOV's case. Brightcove Inc (NASDAQ:BCOV) is the most popular stock in this table. On the other hand Cytosorbents Corp (NASDAQ:CTSO) is the least popular one with only 9 bullish hedge fund positions. Movado Group, Inc (NYSE:MOV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately MOV wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MOV investors were disappointed as the stock returned -9% during the second quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.
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