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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Tilly's Inc (NYSE:TLYS).
Is TLYS a good stock to buy now? Tilly's Inc (NYSE:TLYS) investors should be aware of a decrease in hedge fund sentiment of late. Tilly's Inc (NYSE:TLYS) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 21. 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 for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a glance at the fresh hedge fund action regarding Tilly's Inc (NYSE:TLYS).
Do Hedge Funds Think TLYS Is A Good Stock To Buy Now?
At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in TLYS a year ago. So, let's examine 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 $12.7 million reported as of the end of September. Trailing Divisar Capital was Renaissance Technologies, which amassed a stake valued at $9.3 million. Yacktman Asset Management, D E Shaw, and Winton 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 Divisar Capital allocated the biggest weight to Tilly's Inc (NYSE:TLYS), around 4.19% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to TLYS.
Seeing as Tilly's Inc (NYSE:TLYS) has experienced falling interest from the smart money, we can see that there were a few money managers who sold off their entire stakes last quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest investment of all the hedgies monitored by Insider Monkey, worth an estimated $0.7 million in stock. Cliff Asness's fund, AQR Capital Management, also dropped its stock, about $0.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Tilly's Inc (NYSE:TLYS). We will take a look at OptiNose, Inc. (NASDAQ:OPTN), SWK Holdings Corporation (NASDAQ:SWKH), Contango Oil & Gas Company (NYSE:MCF), Nabors Industries Ltd. (NYSE:NBR), Mustang Bio, Inc. (NASDAQ:MBIO), LSI Industries, Inc. (NASDAQ:LYTS), and Gannett Co., Inc. (NYSE:GCI). All of these stocks' market caps resemble TLYS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OPTN,11,22447,2 SWKH,3,143747,-1 MCF,3,2678,0 NBR,12,13624,-3 MBIO,13,17492,0 LYTS,9,23658,3 GCI,11,14522,-1 Average,8.9,34024,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $27 million in TLYS's case. Mustang Bio, Inc. (NASDAQ:MBIO) is the most popular stock in this table. On the other hand SWK Holdings Corporation (NASDAQ:SWKH) 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 overall hedge fund sentiment score for TLYS is 74. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on TLYS as the stock returned 41.5% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.