Is Urban Outfitters, Inc. (URBN) A Good Stock To Buy?

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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Urban Outfitters, Inc. (NASDAQ:URBN) changed recently.

Is URBN a good stock to buy? Urban Outfitters, Inc. (NASDAQ:URBN) shareholders have witnessed a decrease in enthusiasm from smart money lately. Urban Outfitters, Inc. (NASDAQ:URBN) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. There were 24 hedge funds in our database with URBN holdings at the end of December. Our calculations also showed that URBN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the 21st century investor’s toolkit there are several signals shareholders can use to grade publicly traded companies. A pair of the less known signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the S&P 500 by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Robert Pohly of Samlyn Capital

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Do Hedge Funds Think URBN Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards URBN over the last 23 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, Arrowstreet Capital was the largest shareholder of Urban Outfitters, Inc. (NASDAQ:URBN), with a stake worth $53.7 million reported as of the end of March. Trailing Arrowstreet Capital was Samlyn Capital, which amassed a stake valued at $34.9 million. Driehaus Capital, North Fourth Asset Management, and MIK 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 MIK Capital allocated the biggest weight to Urban Outfitters, Inc. (NASDAQ:URBN), around 2.19% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, designating 2.07 percent of its 13F equity portfolio to URBN.

Since Urban Outfitters, Inc. (NASDAQ:URBN) has experienced bearish sentiment from the smart money, logic holds that there were a few funds that decided to sell off their entire stakes in the first quarter. Interestingly, Philippe Laffont’s Coatue Management said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, totaling close to $25.8 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund dumped about $3.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Urban Outfitters, Inc. (NASDAQ:URBN) but similarly valued. We will take a look at Investors Bancorp, Inc. (NASDAQ:ISBC), Beacon Roofing Supply, Inc. (NASDAQ:BECN), Cannae Holdings, Inc. (NYSE:CNNE), BRF SA (NYSE:BRFS), Cushman & Wakefield plc (NYSE:CWK), Spectrum Brands Holdings, Inc. (NYSE:SPB), and Kirby Corporation (NYSE:KEX). All of these stocks’ market caps match URBN’s market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ISBC,12,78620,-12 BECN,21,411376,-2 CNNE,36,672726,2 BRFS,8,47746,-3 CWK,19,157185,4 SPB,37,618156,2 KEX,23,632227,1 Average,22.3,374005,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $141 million in URBN’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 8 bullish hedge fund positions. Urban Outfitters, Inc. (NASDAQ:URBN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for URBN is 50.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately URBN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on URBN were disappointed as the stock returned -0.8% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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