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Here is What Hedge Funds Think About Tilly’s Inc (TLYS)

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2019. In this article we are going to take a look at smart money sentiment towards Tilly's Inc (NYSE:TLYS).

Tilly's Inc (NYSE:TLYS) was in 14 hedge funds' portfolios at the end of September. TLYS has experienced an increase in enthusiasm from smart money lately. There were 13 hedge funds in our database with TLYS positions at the end of the previous quarter. Our calculations also showed that TLYS 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.

5 Most Popular Stocks Among Hedge Funds

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_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

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. We're going to take a look at the key hedge fund action encompassing Tilly's Inc (NYSE:TLYS).

What have hedge funds been doing with Tilly's Inc (NYSE:TLYS)?

At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in TLYS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Divisar Capital was the largest shareholder of Tilly's Inc (NYSE:TLYS), with a stake worth $18 million reported as of the end of September. Trailing Divisar Capital was Renaissance Technologies, which amassed a stake valued at $17.2 million. Millennium Management, AQR Capital Management, and D E Shaw 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 Divisar Capital allocated the biggest weight to Tilly's Inc (NYSE:TLYS), around 5.98% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to TLYS.

With a general bullishness amongst the heavyweights, some big names have jumped into Tilly's Inc (NYSE:TLYS) headfirst. Winton Capital Management, managed by David Harding, initiated the most valuable position in Tilly's Inc (NYSE:TLYS). Winton Capital Management had $0.2 million invested in the company at the end of the quarter. Thomas Bailard's Bailard Inc also initiated a $0.1 million position during the quarter. The only other fund with a brand new TLYS position is Paul Marshall and Ian Wace's Marshall Wace.

Let's also examine hedge fund activity in other stocks similar to Tilly's Inc (NYSE:TLYS). We will take a look at Duluth Holdings Inc. (NASDAQ:DLTH), USD Partners LP (NYSE:USDP), Allot Ltd. (NASDAQ:ALLT), and IDT Corporation (NYSE:IDT). All of these stocks' market caps are similar to TLYS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DLTH,9,13309,-1 USDP,3,3292,0 ALLT,9,64237,1 IDT,11,39665,-2 Average,8,30126,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $57 million in TLYS's case. IDT Corporation (NYSE:IDT) is the most popular stock in this table. On the other hand USD Partners LP (NYSE:USDP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Tilly's Inc (NYSE:TLYS) 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. Unfortunately TLYS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TLYS were disappointed as the stock returned 4.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

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

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