Did Hedge Funds Drop The Ball On Tiffany & Co. (TIF) ?

“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

Is Tiffany & Co. (NYSE:TIF) a buy, sell, or hold? Hedge funds are becoming less hopeful. The number of bullish hedge fund bets decreased by 13 lately. Our calculations also showed that TIF isn’t among the 30 most popular stocks among hedge funds. TIF was in 30 hedge funds’ portfolios at the end of December. There were 43 hedge funds in our database with TIF positions at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Barry Rosenstein JANA PARTNERS

We’re going to go over the latest hedge fund action regarding Tiffany & Co. (NYSE:TIF).

What does the smart money think about Tiffany & Co. (NYSE:TIF)?

Heading into the first quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TIF over the last 14 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Lone Pine Capital was the largest shareholder of Tiffany & Co. (NYSE:TIF), with a stake worth $545.5 million reported as of the end of September. Trailing Lone Pine Capital was JANA Partners, which amassed a stake valued at $152 million. Brahman Capital, Thunderbird Partners, and Manikay Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Tiffany & Co. (NYSE:TIF) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of money managers that elected to cut their entire stakes heading into Q3. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the biggest stake of the 700 funds tracked by Insider Monkey, valued at close to $139.7 million in stock. Jacob Doft’s fund, Highline Capital Management, also cut its stock, about $134.8 million worth. These transactions are interesting, as total hedge fund interest fell by 13 funds heading into Q3.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tiffany & Co. (NYSE:TIF) but similarly valued. We will take a look at Tapestry, Inc. (NYSE:TPR), Jack Henry & Associates, Inc. (NASDAQ:JKHY), Braskem SA (NYSE:BAK), and Kansas City Southern (NYSE:KSU). This group of stocks’ market caps are closest to TIF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TPR 38 579451 5
JKHY 21 197585 7
BAK 9 312108 -4
KSU 20 371136 -4
Average 22 365070 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $365 million. That figure was $1226 million in TIF’s case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 9 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. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on TIF as the stock returned 19.9% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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