Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Tilray, Inc. (NASDAQ:TLRY).
Hedge fund interest in Tilray, Inc. (NASDAQ:TLRY) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare TLRY to other stocks including Prospect Capital Corporation (NASDAQ:PSEC), Seritage Growth Properties (NYSE:SRG), and Belden Inc. (NYSE:BDC) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/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. Let's take a glance at the fresh hedge fund action regarding Tilray, Inc. (NASDAQ:TLRY).
Hedge fund activity in Tilray, Inc. (NASDAQ:TLRY)
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in TLRY a year ago. 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, Citadel Investment Group was the largest shareholder of Tilray, Inc. (NASDAQ:TLRY), with a stake worth $24.7 million reported as of the end of September. Trailing Citadel Investment Group was Newtyn Management, which amassed a stake valued at $7.5 million. Think Investments, Southpoint Capital Advisors, and Sculptor 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 Think Investments allocated the biggest weight to Tilray, Inc. (NASDAQ:TLRY), around 2.08% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, earmarking 0.71 percent of its 13F equity portfolio to TLRY.
Because Tilray, Inc. (NASDAQ:TLRY) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedgies who sold off their positions entirely in the third quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $0.6 million in stock, and Joel Greenblatt's Gotham Asset Management was right behind this move, as the fund cut about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Tilray, Inc. (NASDAQ:TLRY). These stocks are Prospect Capital Corporation (NASDAQ:PSEC), Seritage Growth Properties (NYSE:SRG), Belden Inc. (NYSE:BDC), and Reata Pharmaceuticals, Inc. (NASDAQ:RETA). This group of stocks' market values are closest to TLRY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSEC,11,43044,0 SRG,13,432895,-2 BDC,13,77112,-2 RETA,20,212229,5 Average,14.25,191320,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $19 million in TLRY's case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Tilray, Inc. (NASDAQ:TLRY) is even less popular than PSEC. Hedge funds dodged a bullet by taking a bearish stance towards TLRY. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TLRY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TLRY investors were disappointed as the stock returned -19.8% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.