We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Tapestry, Inc. (NYSE:TPR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Tapestry, Inc. (NYSE:TPR) a healthy stock for your portfolio? The smart money is betting on the stock. The number of long hedge fund bets inched up by 14 in recent months. Our calculations also showed that TPR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are many signals stock market investors use to analyze publicly traded companies. A couple of the less known signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outpace the broader indices by a significant margin (see the details here).
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the recent hedge fund action regarding Tapestry, Inc. (NYSE:TPR).
What have hedge funds been doing with Tapestry, Inc. (NYSE:TPR)?
At the end of the fourth quarter, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 54% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TPR over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Samlyn Capital, managed by Robert Pohly, holds the number one position in Tapestry, Inc. (NYSE:TPR). Samlyn Capital has a $92.8 million position in the stock, comprising 1.9% of its 13F portfolio. The second most bullish fund manager is John Overdeck and David Siegel of Two Sigma Advisors, with a $80.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers that hold long positions include Jacob Mitchell’s Antipodes Partners, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Antipodes Partners allocated the biggest weight to Tapestry, Inc. (NYSE:TPR), around 3% of its 13F portfolio. Samlyn Capital is also relatively very bullish on the stock, earmarking 1.95 percent of its 13F equity portfolio to TPR.
As one would reasonably expect, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Tapestry, Inc. (NYSE:TPR). Balyasny Asset Management had $23.9 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also made a $7.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Kamyar Khajavi’s MIK Capital, Renaissance Technologies, and Lee Ainslie’s Maverick Capital.
Let’s also examine hedge fund activity in other stocks similar to Tapestry, Inc. (NYSE:TPR). These stocks are Dropbox, Inc. (NASDAQ:DBX), Algonquin Power & Utilities Corp. (NYSE:AQN), CyrusOne Inc (NASDAQ:CONE), and AptarGroup, Inc. (NYSE:ATR). This group of stocks’ market values match TPR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DBX | 46 | 839623 | 4 |
| AQN | 13 | 248252 | -3 |
| CONE | 32 | 345805 | 8 |
| ATR | 25 | 137409 | 2 |
| Average | 29 | 392772 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $393 million. That figure was $544 million in TPR’s case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 13 bullish hedge fund positions. Tapestry, Inc. (NYSE:TPR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately TPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TPR were disappointed as the stock returned -56.8% during the same time period 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 many of these stocks already outperformed the market so far this year.
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.
