Is The Children’s Place Inc. (PLCE) A Good Stock To Buy?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded The Children’s Place Inc. (NASDAQ:PLCE) based on those filings.

Is PLCE a good stock to buy? The Children’s Place Inc. (NASDAQ:PLCE) has experienced an increase in enthusiasm from smart money lately. The Children’s Place Inc. (NASDAQ:PLCE) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. Our calculations also showed that PLCE isn’t among the 30 most popular stocks among hedge funds (click 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’ 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 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Sander Gerber of Hudson Bay 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 view the recent hedge fund action encompassing The Children’s Place Inc. (NASDAQ:PLCE).

Do Hedge Funds Think PLCE Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the first quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in PLCE a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, holds the largest position in The Children’s Place Inc. (NASDAQ:PLCE). Shellback Capital has a $23.1 million position in the stock, comprising 1.2% of its 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $21.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions comprise Ken Heebner’s Capital Growth Management, D. E. Shaw’s D E Shaw and  Renaissance Technologies. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to The Children’s Place Inc. (NASDAQ:PLCE), around 1.89% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, earmarking 1.25 percent of its 13F equity portfolio to PLCE.

As aggregate interest increased, some big names were leading the bulls’ herd. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, established the most valuable position in The Children’s Place Inc. (NASDAQ:PLCE). Shellback Capital had $23.1 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $20.9 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Sander Gerber’s Hudson Bay Capital Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Children’s Place Inc. (NASDAQ:PLCE) but similarly valued. These stocks are Redwood Trust, Inc. (NYSE:RWT), Agilysys, Inc. (NASDAQ:AGYS), Axcelis Technologies Inc (NASDAQ:ACLS), MannKind Corporation (NASDAQ:MNKD), Lands’ End, Inc. (NASDAQ:LE), First Commonwealth Financial Corporation (NYSE:FCF), and Stock Yards Bancorp, Inc. (NASDAQ:SYBT). This group of stocks’ market valuations are similar to PLCE’s market valuation.

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As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $179 million in PLCE’s case. Axcelis Technologies Inc (NASDAQ:ACLS) is the most popular stock in this table. On the other hand Stock Yards Bancorp, Inc. (NASDAQ:SYBT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks The Children’s Place Inc. (NASDAQ:PLCE) is more popular among hedge funds. Our overall hedge fund sentiment score for PLCE is 83.8. 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 PLCE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PLCE were disappointed as the stock returned -10.3% 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.

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Disclosure: None. This article was originally published at Insider Monkey.