We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Turning Point Brands, Inc. (NYSE:TPB) based on that data.
Is Turning Point Brands, Inc. (NYSE:TPB) a bargain? Hedge funds are taking a bearish view. The number of bullish hedge fund bets went down by 2 lately. Our calculations also showed that TPB isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_339354" align="aligncenter" width="395"] Matthew Drapkin of Becker Drapkin Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the fresh hedge fund action encompassing Turning Point Brands, Inc. (NYSE:TPB).
What does smart money think about Turning Point Brands, Inc. (NYSE:TPB)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TPB over the last 18 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 Sabrepoint Capital, which reported holding $9.5 million worth of stock at the end of September. It was followed by D E Shaw with a $7.5 million position. Other investors bullish on the company included Brigade Capital, Millennium Management, and Becker Drapkin Management. In terms of the portfolio weights assigned to each position Becker Drapkin Management allocated the biggest weight to Turning Point Brands, Inc. (NYSE:TPB), around 6.83% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, dishing out 5.79 percent of its 13F equity portfolio to TPB.
Because Turning Point Brands, Inc. (NYSE:TPB) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of hedge funds that slashed their positions entirely by the end of the first quarter. At the top of the heap, Zachary Miller's Parian Global Management cut the largest investment of all the hedgies watched by Insider Monkey, totaling close to $9.7 million in stock, and Joseph Samuels's Islet Management was right behind this move, as the fund cut about $4.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks similar to Turning Point Brands, Inc. (NYSE:TPB). These stocks are The Meet Group Inc (NASDAQ:MEET), QuinStreet Inc (NASDAQ:QNST), G1 Therapeutics, Inc. (NASDAQ:GTHX), and Energy Recovery, Inc. (NASDAQ:ERII). This group of stocks' market valuations are similar to TPB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MEET,21,96815,6 QNST,22,93394,4 GTHX,13,25511,2 ERII,11,45757,4 Average,16.75,65369,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $48 million in TPB's case. QuinStreet Inc (NASDAQ:QNST) is the most popular stock in this table. On the other hand Energy Recovery, Inc. (NASDAQ:ERII) is the least popular one with only 11 bullish hedge fund positions. Turning Point Brands, Inc. (NYSE:TPB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately TPB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TPB investors were disappointed as the stock returned 15.5% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.