We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Town Sports International Holdings, Inc. (NASDAQ:CLUB).
Town Sports International Holdings, Inc. (NASDAQ:CLUB) was in 9 hedge funds’ portfolios at the end of September. CLUB investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 10 hedge funds in our database with CLUB positions at the end of the previous quarter. Our calculations also showed that CLUB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are dozens of gauges shareholders put to use to analyze publicly traded companies. Two of the most under-the-radar gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform their index-focused peers by a healthy margin (see the details here).
Parag Vora of HG Vora Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the recent hedge fund action surrounding Town Sports International Holdings, Inc. (NASDAQ:CLUB).
Hedge fund activity in Town Sports International Holdings, Inc. (NASDAQ:CLUB)
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CLUB over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, HG Vora Capital Management held the most valuable stake in Town Sports International Holdings, Inc. (NASDAQ:CLUB), which was worth $13.9 million at the end of the third quarter. On the second spot was Stadium Capital Management which amassed $4.5 million worth of shares. Renaissance Technologies, Cruiser Capital Advisors, and Wallace 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 Stadium Capital Management allocated the biggest weight to Town Sports International Holdings, Inc. (NASDAQ:CLUB), around 2.71% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, earmarking 1.34 percent of its 13F equity portfolio to CLUB.
Due to the fact that Town Sports International Holdings, Inc. (NASDAQ:CLUB) has witnessed falling interest from hedge fund managers, we can see that there were a few fund managers who were dropping their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, totaling about $0.2 million in stock. Donald Sussman’s fund, Paloma Partners, also dropped its stock, about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Town Sports International Holdings, Inc. (NASDAQ:CLUB). We will take a look at LSC Communications, Inc. (NYSE:LKSD), Friedman Industries (NYSE:FRD), Gevo, Inc. (NASDAQ:GEVO), and MTBC, Inc. (NASDAQ:MTBC). This group of stocks’ market caps are closest to CLUB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LKSD | 10 | 6738 | 1 |
| FRD | 1 | 3206 | 0 |
| GEVO | 1 | 1787 | 0 |
| MTBC | 2 | 2250 | -1 |
| Average | 3.5 | 3495 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $22 million in CLUB’s case. LSC Communications, Inc. (NYSE:LKSD) is the most popular stock in this table. On the other hand Friedman Industries (NYSE:FRD) is the least popular one with only 1 bullish hedge fund positions. Town Sports International Holdings, Inc. (NASDAQ:CLUB) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CLUB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLUB were disappointed as the stock returned -6.1% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.
