How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Tiffany & Co. (NYSE:TIF).
Is Tiffany & Co. (NYSE:TIF) a buy here? The best stock pickers were selling. The number of bullish hedge fund bets went down by 5 in recent months. Tiffany & Co. (NYSE:TIF) was in 64 hedge funds’ portfolios at the end of June. The all time high for this statistics is 69. Our calculations also showed that TIF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 69 hedge funds in our database with TIF holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Halbower of Pentwater Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a look at the new hedge fund action surrounding Tiffany & Co. (NYSE:TIF).
What have hedge funds been doing with Tiffany & Co. (NYSE:TIF)?
At Q2’s end, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TIF over the last 20 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Matthew Halbower’s Pentwater Capital Management has the largest position in Tiffany & Co. (NYSE:TIF), worth close to $396.9 million, corresponding to 7.1% of its total 13F portfolio. On Pentwater Capital Management’s heels is Renaissance Technologies, with a $162.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions consist of Robert Emil Zoellner’s Alpine Associates, Ken Griffin’s Citadel Investment Group and Clint Carlson’s Carlson Capital. In terms of the portfolio weights assigned to each position Hunting Hill Global Capital allocated the biggest weight to Tiffany & Co. (NYSE:TIF), around 18.34% of its 13F portfolio. Sand Grove Capital Partners is also relatively very bullish on the stock, dishing out 17.58 percent of its 13F equity portfolio to TIF.
Judging by the fact that Tiffany & Co. (NYSE:TIF) has experienced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their full holdings in the second quarter. At the top of the heap, Guardian Capital’s GuardCap Asset Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $62.2 million in stock. Tom Sandell’s fund, Sandell Asset Management, also said goodbye to its stock, about $46.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Tiffany & Co. (NYSE:TIF). These stocks are Hologic, Inc. (NASDAQ:HOLX), BeiGene, Ltd. (NASDAQ:BGNE), CarMax Inc (NYSE:KMX), Broadridge Financial Solutions, Inc. (NYSE:BR), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Ryanair Holdings plc (NASDAQ:RYAAY), and Domino’s Pizza, Inc. (NYSE:DPZ). This group of stocks’ market valuations match TIF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOLX | 46 | 1546938 | 5 |
| BGNE | 13 | 3356980 | 2 |
| KMX | 46 | 1420392 | 9 |
| BR | 24 | 193920 | -5 |
| SSNC | 65 | 2274258 | 8 |
| RYAAY | 21 | 746925 | -1 |
| DPZ | 47 | 1746559 | 2 |
| Average | 37.4 | 1612282 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $1612 million. That figure was $2402 million in TIF’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 13 bullish hedge fund positions. Tiffany & Co. (NYSE:TIF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TIF is 76.9. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately TIF wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TIF were disappointed as the stock returned 1.1% since the end of June (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
