We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of CSS Industries, Inc. (NYSE:CSS) based on that data.
CSS Industries, Inc. (NYSE:CSS) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that CSS 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's go over the new hedge fund action surrounding CSS Industries, Inc. (NYSE:CSS).
How have hedgies been trading CSS Industries, Inc. (NYSE:CSS)?
At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -43% from the second quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in CSS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in CSS Industries, Inc. (NYSE:CSS), worth close to $1.2 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Bradley Louis Radoff of Fondren Management, with a $0.9 million position; 0.8% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Frederick DiSanto's Ancora Advisors, John Overdeck and David Siegel's Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to CSS Industries, Inc. (NYSE:CSS), around 0.76% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to CSS.
Due to the fact that CSS Industries, Inc. (NYSE:CSS) has faced a decline in interest from the smart money, it's easy to see that there were a few money managers that slashed their entire stakes heading into Q4. It's worth mentioning that Jeffrey Bronchick's Cove Street Capital cut the largest stake of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $0.3 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund dumped about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to CSS Industries, Inc. (NYSE:CSS). We will take a look at Willamette Valley Vineyards, Inc. (NASDAQ:WVVI), iFresh Inc. (NASDAQ:IFMK), China SXT Pharmaceuticals, Inc. (NASDAQ:SXTC), and Ambow Education Holding Ltd. (NYSE:AMBO). This group of stocks' market caps are closest to CSS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WVVI,1,679,0 IFMK,1,56,-1 SXTC,2,2556,1 AMBO,2,54,0 Average,1.5,836,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in CSS's case. China SXT Pharmaceuticals, Inc. (NASDAQ:SXTC) is the most popular stock in this table. On the other hand Willamette Valley Vineyards, Inc. (NASDAQ:WVVI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks CSS Industries, Inc. (NYSE:CSS) 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. Hedge funds were also right about betting on CSS as the stock returned 11.3% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.