Is Guess’, Inc. (GES) A Good Stock To Buy?

Abigail Fisher

Updated Tue, Dec 18, 2018, 9:37 PM

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the first 6 weeks of the fourth quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Guess', Inc. (NYSE:GES) to find out whether it was one of their high conviction long-term ideas.

Guess', Inc. (NYSE:GES) investors should be aware of a decrease in support from the world's most elite money managers recently. Our calculations also showed that GES isn't among the 30 most popular stocks among hedge funds.

If you'd ask most stock holders, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are over 8,000 funds trading at present, We choose to focus on the elite of this club, about 700 funds. These hedge fund managers command the majority of all hedge funds' total asset base, and by keeping track of their matchless stock picks, Insider Monkey has spotted various investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

We're going to take a peek at the new hedge fund action regarding Guess', Inc. (NYSE:GES).

How are hedge funds trading Guess', Inc. (NYSE:GES)?

At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards GES over the last 13 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Ainslie's Maverick Capital has the number one position in Guess', Inc. (NYSE:GES), worth close to $24.8 million, accounting for 0.3% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $12.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions consist of Dmitry Balyasny's Balyasny Asset Management, Paul Marshall and Ian Wace's Marshall Wace LLP and Frederick DiSanto's Ancora Advisors.

Since Guess', Inc. (NYSE:GES) has faced declining sentiment from the smart money, we can see that there was a specific group of money managers that elected to cut their full holdings in the third quarter. Intriguingly, David Keidan's Buckingham Capital Management dumped the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $1.8 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dumped about $1.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Guess', Inc. (NYSE:GES) but similarly valued. We will take a look at NxStage Medical, Inc. (NASDAQ:NXTM), WillScot Corporation (NASDAQ:WSC), Mueller Water Products, Inc. (NYSE:MWA), and NOW Inc (NYSE:DNOW). This group of stocks' market values match GES's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXTM,32,528339,0 WSC,26,261579,-5 MWA,16,236172,0 DNOW,11,79327,2 Average,21.25,276354,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $276 million. That figure was $81 million in GES's case. NxStage Medical, Inc. (NASDAQ:NXTM) is the most popular stock in this table. On the other hand NOW Inc (NYSE:DNOW) is the least popular one with only 11 bullish hedge fund positions. Guess', Inc. (NYSE:GES) 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. In this regard NXTM might be a better candidate to consider a long position.

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

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