Did Hedge Funds Catch A Break With Tapestry, Inc. (TPR)?

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 Tapestry, Inc. (NYSE:TPR) and determine whether hedge funds had an edge regarding this stock.

Tapestry, Inc. (NYSE:TPR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that TPR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 Watsco Inc (NYSE:WSO), agilon health inc. (NYSE:AGL), and Oak Street Health, Inc. (NYSE:OSH) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s analyze the latest hedge fund action encompassing Tapestry, Inc. (NYSE:TPR).

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

At third quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in TPR a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in Tapestry, Inc. (NYSE:TPR) was held by Suvretta Capital Management, which reported holding $199.1 million worth of stock at the end of September. It was followed by Antipodes Partners with a $77.2 million position. Other investors bullish on the company included Citadel Investment Group, Holocene Advisors, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Portland Hill Asset Management allocated the biggest weight to Tapestry, Inc. (NYSE:TPR), around 4.03% of its 13F portfolio. Suvretta Capital Management is also relatively very bullish on the stock, earmarking 3.34 percent of its 13F equity portfolio to TPR.

Due to the fact that Tapestry, Inc. (NYSE:TPR) has faced falling interest from the smart money, it’s safe to say that there were a few hedge funds that slashed their positions entirely last quarter. It’s worth mentioning that Gavin Baker’s Atreides Management cut the biggest investment of the 750 funds watched by Insider Monkey, totaling an estimated $75.6 million in stock. Alok Agrawal’s fund, Bloom Tree Partners, also sold off its stock, about $27.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tapestry, Inc. (NYSE:TPR) but similarly valued. These stocks are Watsco Inc (NYSE:WSO), agilon health inc. (NYSE:AGL), Oak Street Health, Inc. (NYSE:OSH), QuantumScape Corporation (NYSE:QS), CureVac N.V. (NASDAQ:CVAC), First Solar, Inc. (NASDAQ:FSLR), and Brookfield Renewable Partners L.P. (NYSE:BEP). This group of stocks’ market values are similar to TPR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $887 million in TPR’s case. First Solar, Inc. (NASDAQ:FSLR) is the most popular stock in this table. On the other hand CureVac N.V. (NASDAQ:CVAC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Tapestry, Inc. (NYSE:TPR) is more popular among hedge funds. Our overall hedge fund sentiment score for TPR is 79.6. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on TPR as the stock returned 3.2% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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