Here’s What Hedge Funds Think About Gildan Activewear Inc (GIL)

Nina Todic

Sat, Apr 20, 2019, 6:00 PM

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Gildan Activewear Inc (NYSE:GIL)? The smart money sentiment can provide an answer to this question.

Is Gildan Activewear Inc (NYSE:GIL) worth your attention right now? The best stock pickers are taking an optimistic view. The number of bullish hedge fund positions advanced by 7 in recent months. Our calculations also showed that GIL isn't among the 30 most popular stocks among hedge funds.

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 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

We're going to analyze the key hedge fund action surrounding Gildan Activewear Inc (NYSE:GIL).

What have hedge funds been doing with Gildan Activewear Inc (NYSE:GIL)?

At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 39% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GIL over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Southpoint Capital Advisors was the largest shareholder of Gildan Activewear Inc (NYSE:GIL), with a stake worth $145.7 million reported as of the end of September. Trailing Southpoint Capital Advisors was Nokota Management, which amassed a stake valued at $85.8 million. Pzena Investment Management, Citadel Investment Group, and MD Sass were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were breaking ground themselves. Nokota Management, managed by Matthew Knauer and Mina Faltas, created the most valuable position in Gildan Activewear Inc (NYSE:GIL). Nokota Management had $85.8 million invested in the company at the end of the quarter. Richard S. Pzena's Pzena Investment Management also initiated a $60.3 million position during the quarter. The other funds with brand new GIL positions are Peter S. Park's Park West Asset Management, Dmitry Balyasny's Balyasny Asset Management, and Robert Pitts's Steadfast Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Gildan Activewear Inc (NYSE:GIL) but similarly valued. These stocks are EPAM Systems Inc (NYSE:EPAM), Dr. Reddy's Laboratories Limited (NYSE:RDY), Zendesk Inc (NYSE:ZEN), and Integrated Device Technology, Inc. (NASDAQ:IDTI). This group of stocks' market values are similar to GIL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EPAM,22,80938,1 RDY,10,84442,1 ZEN,53,1794269,9 IDTI,35,1125743,0 Average,30,771348,2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $771 million. That figure was $511 million in GIL's case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Dr. Reddy's Laboratories Limited (NYSE:RDY) is the least popular one with only 10 bullish hedge fund positions. Gildan Activewear Inc (NYSE:GIL) 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 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on GIL, though not to the same extent, as the stock returned 21.1% and outperformed the market as well.

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

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