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Hedge Funds Are Selling Turning Point Brands, Inc. (TPB)

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Is Turning Point Brands, Inc. (NYSE:TPB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Turning Point Brands, Inc. (NYSE:TPB) investors should be aware of a decrease in support from the world's most elite money managers lately. Turning Point Brands, Inc. (NYSE:TPB) was in 25 hedge funds' portfolios at the end of September. The all time high for this statistic is 30. Our calculations also showed that TPB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a look at the recent hedge fund action regarding Turning Point Brands, Inc. (NYSE:TPB).

Izzy Englander of MILLENNIUM MANAGEMENT
Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

Do Hedge Funds Think TPB Is A Good Stock To Buy Now?

At Q3's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in TPB over the last 25 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Turning Point Brands, Inc. (NYSE:TPB) was held by DG Capital Management, which reported holding $21.9 million worth of stock at the end of September. It was followed by Millennium Management with a $14.2 million position. Other investors bullish on the company included Sabrepoint Capital, No Street Capital, and Steamboat Capital Partners. In terms of the portfolio weights assigned to each position Billings Capital Management allocated the biggest weight to Turning Point Brands, Inc. (NYSE:TPB), around 5.5% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, earmarking 4.45 percent of its 13F equity portfolio to TPB.

Because Turning Point Brands, Inc. (NYSE:TPB) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that elected to cut their full holdings by the end of the third quarter. It's worth mentioning that Israel Englander's Millennium Management dropped the largest stake of all the hedgies tracked by Insider Monkey, valued at about $19.7 million in stock, and Matthew Drapkin and Steven R. Becker's Becker Drapkin Management was right behind this move, as the fund said goodbye to about $4 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks similar to Turning Point Brands, Inc. (NYSE:TPB). We will take a look at OneSpaWorld Holdings Limited (NASDAQ:OSW), HealthStream, Inc. (NASDAQ:HSTM), Nerdy Inc. (NYSE:NRDY), Rani Therapeutics Holdings Inc. (NASDAQ:RANI), Omega Therapeutics Inc. (NASDAQ:OMGA), Janux Therapeutics Inc. (NASDAQ:JANX), and The Aaron's Company, Inc. (NYSE:AAN). This group of stocks' market values match TPB's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OSW,8,187279,-4 HSTM,14,65775,0 NRDY,22,298580,22 RANI,2,1854,2 OMGA,10,44214,10 JANX,10,384572,-4 AAN,17,67833,2 Average,11.9,150015,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $146 million in TPB's case. Nerdy Inc. (NYSE:NRDY) is the most popular stock in this table. On the other hand Rani Therapeutics Holdings Inc. (NASDAQ:RANI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Turning Point Brands, Inc. (NYSE:TPB) is more popular among hedge funds. Our overall hedge fund sentiment score for TPB is 75. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Unfortunately TPB wasn't nearly as popular as these 5 stocks and hedge funds that were betting on TPB were disappointed as the stock returned -23.6% since the end of the third quarter (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.