While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Tapestry, Inc. (NYSE:TPR).
Is TPR stock a buy or sell? Tapestry, Inc. (NYSE:TPR) shareholders have witnessed an increase in enthusiasm from smart money recently. Tapestry, Inc. (NYSE:TPR) was in 49 hedge funds’ portfolios at the end of December. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TPR isn’t among the 30 most popular stocks among hedge funds (click for Q4 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’ 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 124 percentage points since March 2017 (see the details here).
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 (or at the end of this article). Now let’s view the latest hedge fund action encompassing Tapestry, Inc. (NYSE:TPR).
Do Hedge Funds Think TPR Is A Good Stock To Buy Now?
At Q4’s end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in TPR a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Tapestry, Inc. (NYSE:TPR) was held by Suvretta Capital Management, which reported holding $172.8 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $157.5 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Holocene Advisors. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Tapestry, Inc. (NYSE:TPR), around 3.81% of its 13F portfolio. Portland Hill Asset Management is also relatively very bullish on the stock, dishing out 3.65 percent of its 13F equity portfolio to TPR.
As one would reasonably expect, some big names have jumped into Tapestry, Inc. (NYSE:TPR) headfirst. Scopus Asset Management, managed by Alexander Mitchell, initiated the most valuable position in Tapestry, Inc. (NYSE:TPR). Scopus Asset Management had $52.8 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also made a $48 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Alok Agrawal’s Bloom Tree Partners, and Principal Global Investors’s Columbus Circle Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tapestry, Inc. (NYSE:TPR) but similarly valued. These stocks are Globant SA (NYSE:GLOB), Alleghany Corporation (NYSE:Y), Dada Nexus Limited (NASDAQ:DADA), AGNC Investment Corp. (NASDAQ:AGNC), Hubbell Incorporated (NYSE:HUBB), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and Chemed Corporation (NYSE:CHE). All of these stocks’ market caps are similar to TPR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOB | 15 | 279923 | -6 |
| Y | 34 | 364699 | 5 |
| DADA | 25 | 168093 | 8 |
| AGNC | 25 | 353105 | -7 |
| HUBB | 22 | 425947 | -8 |
| ACAD | 38 | 3081113 | -3 |
| CHE | 31 | 428254 | -3 |
| Average | 27.1 | 728733 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $1295 million in TPR’s case. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is the most popular stock in this table. On the other hand Globant SA (NYSE:GLOB) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Tapestry, Inc. (NYSE:TPR) is more popular among hedge funds. Our overall hedge fund sentiment score for TPR is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on TPR as the stock returned 43.8% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
