We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Container Store Group Inc (NYSE:TCS).
Container Store Group Inc (NYSE:TCS) shareholders have witnessed a decrease in support from the world's most elite money managers lately. Our calculations also showed that TCS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_365194" align="alignnone" width="600"] David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the fresh hedge fund action encompassing Container Store Group Inc (NYSE:TCS).
Hedge fund activity in Container Store Group Inc (NYSE:TCS)
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in TCS a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, D E Shaw, managed by David E. Shaw, holds the largest position in Container Store Group Inc (NYSE:TCS). D E Shaw has a $3.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Rutabaga Capital Management, managed by Peter Schliemann, which holds a $2.5 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining peers that hold long positions encompass Renaissance Technologies, Paul Marshall and Ian Wace's Marshall Wace and Philippe Laffont's Coatue Management. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to Container Store Group Inc (NYSE:TCS), around 0.88% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to TCS.
Judging by the fact that Container Store Group Inc (NYSE:TCS) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few fund managers who sold off their full holdings heading into Q4. At the top of the heap, Brian Gustavson and Andrew Haley's 1060 Capital Management cut the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $2.7 million in stock, and Chuck Royce's Royce & Associates was right behind this move, as the fund dumped about $1.2 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Container Store Group Inc (NYSE:TCS) but similarly valued. We will take a look at Penns Woods Bancorp, Inc. (NASDAQ:PWOD), Mid Penn Bancorp (NASDAQ:MPB), GP Strategies Corporation (NYSE:GPX), and Ceragon Networks Ltd. (NASDAQ:CRNT). All of these stocks' market caps are closest to TCS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PWOD,1,5741,0 MPB,4,7365,0 GPX,13,103148,0 CRNT,3,11894,-1 Average,5.25,32037,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $12 million in TCS's case. GP Strategies Corporation (NYSE:GPX) is the most popular stock in this table. On the other hand Penns Woods Bancorp, Inc. (NASDAQ:PWOD) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Container Store Group Inc (NYSE:TCS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TCS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TCS were disappointed as the stock returned -5.9% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.