Should You Avoid Children’s Place Retail Stores, Inc. (PLCE)?

How do we determine whether Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Children’s Place Retail Stores, Inc. a good investment right now? Prominent investors are getting less optimistic. The number of bullish hedge fund positions dropped by 8 in recent months. 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 Milacron Holdings Corp (NYSE:MCRN), Redwood Trust, Inc. (NYSE:RWT), and Ixia (NASDAQ:XXIA) to gather more data points.

Keeping this in mind, let’s take a glance at the recent action surrounding Children’s Place Retail Stores, Inc. (NASDAQ:PLCE).

How are hedge funds trading Children’s Place Retail Stores, Inc. (NASDAQ:PLCE)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -42% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), worth close to $118.1 million, comprising 0.6% of its total 13F portfolio. The second largest stake is held by Joel Greenblatt of Gotham Asset Management, with a $21.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Dmitry Balyasny’s Balyasny Asset Management, Jim Simons’s Renaissance Technologies and Neil Chriss’s Hutchin Hill Capital.

Seeing as Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few money managers that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest investment of the 700 funds followed by Insider Monkey, totaling an estimated $11.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $5.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 8 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) but similarly valued. We will take a look at Milacron Holdings Corp (NYSE:MCRN), Redwood Trust, Inc. (NYSE:RWT), Ixia (NASDAQ:XXIA), and Universal Forest Products, Inc. (NASDAQ:UFPI). All of these stocks’ market caps match PLCE’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $185 million in PLCE’s case. Ixia (NASDAQ:XXIA) is the most popular stock in this table. On the other hand Redwood Trust, Inc. (NYSE:RWT) is the least popular one with only 6 bullish hedge fund positions. Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) 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 XXIA might be a better candidate to consider a long position.