Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Tuesday Morning Corporation (NASDAQ:TUES) investors should be aware of a decrease in support from the world’s most successful money managers in recent months. TUES was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. There were 8 hedge funds in our database with TUES positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Clearfield, Inc. (NASDAQ:CLFD), AgroFresh Solutions Inc (NASDAQ:AGFS), and Malibu Boats Inc (NASDAQ:MBUU) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, we’re going to check out the recent action surrounding Tuesday Morning Corporation (NASDAQ:TUES).
What does the smart money think about Tuesday Morning Corporation (NASDAQ:TUES)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 13% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in TUES heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, PAR Capital Management, led by Paul Reeder and Edward Shapiro, holds the biggest position in Tuesday Morning Corporation (NASDAQ:TUES). According to regulatory filings, the fund has a $13.7 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $13.1 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of D. E. Shaw’s D E Shaw, one of the largest hedge funds in the world, Ken Griffin’s Citadel Investment Group and Peter Muller’s PDT Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that Tuesday Morning Corporation (NASDAQ:TUES) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of money managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management cashed in the biggest position of the 700 funds watched by Insider Monkey, totaling about $2.5 million in stock, and Jonathan Soros’s JS Capital was right behind this move, as the fund sold off about $0.3 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tuesday Morning Corporation (NASDAQ:TUES) but similarly valued. These stocks are Clearfield, Inc. (NASDAQ:CLFD), AgroFresh Solutions Inc (NASDAQ:AGFS), Malibu Boats Inc (NASDAQ:MBUU), and DSP Group, Inc. (NASDAQ:DSPG). This group of stocks’ market valuations resemble TUES’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLFD | 5 | 11611 | -1 |
| AGFS | 10 | 12142 | -1 |
| MBUU | 14 | 15825 | 5 |
| DSPG | 12 | 58798 | 4 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $31 million in TUES’s case. Malibu Boats Inc (NASDAQ:MBUU) is the most popular stock in this table. On the other hand Clearfield, Inc. (NASDAQ:CLFD) is the least popular one with only 5 bullish hedge fund positions. Tuesday Morning Corporation (NASDAQ:TUES) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MBUU might be a better candidate to consider taking a long position in.
Disclosure: none.
