"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards The Container Store Group, Inc. (NYSE:TCS) and see how it was affected.
The Container Store Group, Inc. (NYSE:TCS) has seen an increase in hedge fund sentiment lately. TCS was in 18 hedge funds' portfolios at the end of the second quarter of 2019. There were 12 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 (see the video below). Video: Click the image to 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a glance at the key hedge fund action regarding The Container Store Group, Inc. (NYSE:TCS).
Hedge fund activity in The Container Store Group, Inc. (NYSE:TCS)
At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TCS over the last 16 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in The Container Store Group, Inc. (NYSE:TCS) was held by D E Shaw, which reported holding $5.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $4.2 million position. Other investors bullish on the company included 1060 Capital Management, Marshall Wace LLP, and Two Sigma Advisors.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. 1060 Capital Management, managed by Brian Gustavson and Andrew Haley, initiated the most valuable position in The Container Store Group, Inc. (NYSE:TCS). 1060 Capital Management had $2.7 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $1.2 million investment in the stock during the quarter. The other funds with brand new TCS positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Paul Tudor Jones's Tudor Investment Corp, and Noam Gottesman's GLG Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Container Store Group, Inc. (NYSE:TCS) but similarly valued. These stocks are Red River Bancshares, Inc. (NASDAQ:RRBI), Care.com Inc (NYSE:CRCM), MiX Telematics Limited (NYSE:MIXT), and Oppenheimer Holdings Inc. (NYSE:OPY). This group of stocks' market values resemble TCS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RRBI,3,3948,3 CRCM,21,113594,3 MIXT,8,46948,0 OPY,9,36092,0 Average,10.25,50146,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $24 million in TCS's case. Care.com Inc (NYSE:CRCM) is the most popular stock in this table. On the other hand Red River Bancshares, Inc. (NASDAQ:RRBI) is the least popular one with only 3 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. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -39.6% during the third 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.