With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Container Store Group Inc (NYSE:TCS).
Is Container Store Group Inc (NYSE:TCS) a buy here? Hedge funds were betting on the stock. The number of long hedge fund bets went up by 3 lately. Container Store Group Inc (NYSE:TCS) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TCS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now let’s analyze the latest hedge fund action surrounding Container Store Group Inc (NYSE:TCS).
Do Hedge Funds Think TCS Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TCS over the last 24 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Leonard Green’s Leonard Green & Partners has the number one position in Container Store Group Inc (NYSE:TCS), worth close to $200 million, corresponding to 1.6% of its total 13F portfolio. The second most bullish fund manager is James Woodson Davis of Woodson Capital Management, with a $53.9 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Container Store Group Inc (NYSE:TCS), around 3.47% of its 13F portfolio. Leonard Green & Partners is also relatively very bullish on the stock, earmarking 1.59 percent of its 13F equity portfolio to TCS.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Manatuck Hill Partners, managed by Mark Broach, created the most valuable position in Container Store Group Inc (NYSE:TCS). Manatuck Hill Partners had $0.7 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.3 million position during the quarter. The other funds with brand new TCS positions are Peter Algert’s Algert Global, Matthew Hulsizer’s PEAK6 Capital Management, and Kamyar Khajavi’s MIK Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Container Store Group Inc (NYSE:TCS) but similarly valued. These stocks are Hovnanian Enterprises, Inc. (NYSE:HOV), Marinus Pharmaceuticals Inc (NASDAQ:MRNS), China Yuchai International Limited (NYSE:CYD), KNOT Offshore Partners LP (NYSE:KNOP), Eastman Kodak Co. (NYSE:KODK), Aldeyra Therapeutics Inc (NASDAQ:ALDX), and IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP). This group of stocks’ market values resemble TCS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOV | 12 | 107485 | -2 |
| MRNS | 13 | 243365 | -3 |
| CYD | 8 | 68959 | 0 |
| KNOP | 3 | 29213 | -1 |
| KODK | 13 | 38785 | 1 |
| ALDX | 18 | 189430 | 1 |
| IRCP | 4 | 11801 | 0 |
| Average | 10.1 | 98434 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $296 million in TCS’s case. Aldeyra Therapeutics Inc (NASDAQ:ALDX) is the most popular stock in this table. On the other hand KNOT Offshore Partners LP (NYSE:KNOP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Container Store Group Inc (NYSE:TCS) is more popular among hedge funds. Our overall hedge fund sentiment score for TCS is 88. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately TCS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TCS were disappointed as the stock returned -18.2% since the end of the second quarter (through 10/22) 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.
Follow Container Store Group Inc. (NSE:TCS)
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Disclosure: None. This article was originally published at Insider Monkey.
