The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded The Container Store Group Inc (NYSE:TCS) based on those filings.
The Container Store Group Inc (NYSE:TCS) has experienced a decrease in hedge fund interest recently. TCS was in 8 hedge funds' portfolios at the end of the first quarter of 2020. There were 13 hedge funds in our database with TCS positions at the end of the previous quarter. Our calculations also showed that TCS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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' 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
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Roger Ibbotson of Zebra Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the latest hedge fund action encompassing The Container Store Group Inc (NYSE:TCS).
What have hedge funds been doing with The Container Store Group Inc (NYSE:TCS)?
At Q1's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options 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.
Among these funds, Rutabaga Capital Management held the most valuable stake in The Container Store Group Inc (NYSE:TCS), which was worth $3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $1.1 million worth of shares. Two Sigma Advisors, Millennium Management, and Zebra Capital Management 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 Rutabaga Capital Management allocated the biggest weight to The Container Store Group Inc (NYSE:TCS), around 1.81% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to TCS.
Since The Container Store Group Inc (NYSE:TCS) has faced declining sentiment from hedge fund managers, it's easy to see that there exists a select few money managers that slashed their full holdings last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the largest position of the 750 funds watched by Insider Monkey, comprising about $1 million in stock. Noam Gottesman's fund, GLG Partners, also sold off its stock, about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 5 funds last quarter.
Let's go over hedge fund activity in other stocks similar to The Container Store Group Inc (NYSE:TCS). We will take a look at New Age Beverages Corporation (NASDAQ:NBEV), Esquire Financial Holdings, Inc. (NASDAQ:ESQ), J.C. Penney Company, Inc. (NYSE:JCP), and LogicBio Therapeutics, Inc. (NASDAQ:LOGC). This group of stocks' market caps are similar to TCS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NBEV,4,710,-1 ESQ,4,9081,-1 JCP,12,8075,-3 LOGC,4,42883,-1 Average,6,15187,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $5 million in TCS's case. J.C. Penney Company, Inc. (NYSE:JCP) is the most popular stock in this table. On the other hand New Age Beverages Corporation (NASDAQ:NBEV) is the least popular one with only 4 bullish hedge fund positions. The Container Store Group Inc (NYSE:TCS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on TCS as the stock returned 36% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.