Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. In this article we are going to take a look at smart money sentiment towards Tiffany & Co. (NYSE:TIF).
Tiffany & Co. (NYSE:TIF) was in 30 hedge funds’ portfolios at the end of the third quarter of 2019. TIF investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 22 hedge funds in our database with TIF positions at the end of the previous quarter. Our calculations also showed that TIF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
John Armitage of Egerton Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing Tiffany & Co. (NYSE:TIF).
Hedge fund activity in Tiffany & Co. (NYSE:TIF)
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. By comparison, 43 hedge funds held shares or bullish call options in TIF a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Tiffany & Co. (NYSE:TIF) was held by Lone Pine Capital, which reported holding $591.2 million worth of stock at the end of September. It was followed by Egerton Capital Limited with a $452.4 million position. Other investors bullish on the company included Thunderbird Partners, Holocene Advisors, and Dorsal Capital Management. In terms of the portfolio weights assigned to each position Thunderbird Partners allocated the biggest weight to Tiffany & Co. (NYSE:TIF), around 17.45% of its 13F portfolio. Manikay Partners is also relatively very bullish on the stock, setting aside 5.17 percent of its 13F equity portfolio to TIF.
Now, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, assembled the most valuable position in Tiffany & Co. (NYSE:TIF). Holocene Advisors had $65.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $6.2 million position during the quarter. The other funds with new positions in the stock are Philippe Laffont’s Coatue Management, Michael Gelband’s ExodusPoint Capital, and Renee Yao’s Neo Ivy Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tiffany & Co. (NYSE:TIF) but similarly valued. These stocks are Zebra Technologies Corporation (NASDAQ:ZBRA), NiSource Inc. (NYSE:NI), Rollins, Inc. (NYSE:ROL), and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH). This group of stocks’ market caps are closest to TIF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZBRA | 18 | 427751 | -2 |
| NI | 22 | 811933 | 0 |
| ROL | 25 | 306391 | 2 |
| NCLH | 30 | 1012048 | -5 |
| Average | 23.75 | 639531 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $640 million. That figure was $1501 million in TIF’s case. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is the most popular stock in this table. On the other hand Zebra Technologies Corporation (NASDAQ:ZBRA) is the least popular one with only 18 bullish hedge fund positions. Tiffany & Co. (NYSE:TIF) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on TIF as the stock returned 69.6% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
