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Jason Karp Taking A Bite Out Of Texas Retailers

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Jason Karp‘s Tourbillon Capital Partners is betting big on Texas-based retailers CONN’S, Inc. (NASDAQ:CONN) and Men’s Wearhouse Inc (NYSE:MW). In a 13G filing submitted with the SEC on September 11, the fund revealed that it has increased its stake in CONN’S, Inc. (NASDAQ:CONN) to almost 3.25 million shares, or 8.9% of th outstanding shares of the company, more than double the 1.5 million shares that it held at the end of June. In a separate filing submitted on the same day, Tourbillon Capital disclosed that it now owns slightly above 2.9 million shares or 2.9% of the common stock of Men’s Wearhouse Inc (NYSE:MW).

Jason Karp - Tourbillon Capital Partners

Tourbillon Capital Partners, a New York-based long/short equity hedge fund, was founded by Jason Karp in 2013. Mr. Karp holds a B.S. in Economics from the Wharton School of the University of Pennsylvania. Prior to founding Tourbillon, Mr. Karp worked at legendary trader Steve Cohen’s now-defunct hedge fund SAC Capital between 2005 and 2009. Starting with $250 million in assets under management (AUM) in 2013, Tourbillon Capital now boasts a U.S public equity portfolio worth $4.6 billion. As of June 30, the top ten holdings of the firm accounted for 41.73% of its equity portfolio and 38% of the fund’s portfolio was invested in stocks from the consumer discretionary sector.

Jason Karp
Jason Karp
Tourbillon Capital Partners

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by over 60 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.

CONN’S, Inc. (NASDAQ:CONN) has been one of the best performing retail sector stocks this year. Even though it has slipped by more than 35% from the high it hit in July, it still trades up over 50% year-to-date. On September 9, shares of the company opened the session up by more than 13% following the release of its second quarter earnings results, but gave up all of those gains during the trading session and have now receded by over 8% over the last three trading days. The company reported EPS of $0.47 for the quarter on revenue of $396.10 million, compared to analysts’ estimates of EPS of $0.47 on revenue of $396.38 million. On September 10, following the earnings release, analysts at Piper Jaffray reiterated their ‘Buy’ rating on the stock, however, they lowered their price target on it to $37 from $45. CONN’S reported the completion of its previously announced securitization of $1.12 billion of receivables from its credit segment on September 11.  Several investors who previously pushed for the separation of the company’s retail segment from its credit segment see it as a promising move. Robert Pohly‘s Samlyn Capital was one of the hedge funds that initiated a stake in CONN’S during the second quarter and held over 1.45 million shares of the company on June 30.

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