Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Container Store Group Inc (NYSE:TCS) has experienced a decrease in activity from the world’s largest hedge funds recently. There were 12 hedge funds in our database with TCS holdings at the end of the previous quarter. At the end of this article we will also compare TCS to other stocks including Olympic Steel, Inc. (NASDAQ:ZEUS), Patriot National Inc (NYSE:PN), and JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, we’re going to analyze the fresh action regarding Container Store Group Inc (NYSE:TCS).
What does the smart money think about Container Store Group Inc (NYSE:TCS)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 42% from the second quarter of 2016. On the other hand, there were a total of 8 hedge funds with a bullish position in TCS at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Peter Schliemann’s Rutabaga Capital Management has the biggest position in Container Store Group Inc (NYSE:TCS), worth close to $8.2 million, comprising 1.6% of its total 13F portfolio. The second largest stake is held by D E Shaw, one of the biggest hedge funds in the world, which oversees a $2.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions contain Jim Simons’s Renaissance Technologies, Chuck Royce’s Royce & Associates and Daniel S. Och’s OZ Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on Container Store Group Inc (NYSE:TCS) and some hedge funds actually said goodbye to their positions entirely. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the largest investment of all the investors monitored by Insider Monkey, worth close to $1 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dropped about $0.4 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Container Store Group Inc (NYSE:TCS) but similarly valued. These stocks are Olympic Steel, Inc. (NASDAQ:ZEUS), Patriot National Inc (NYSE:PN), JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO), and LSB Industries, Inc. (NYSE:LXU). This group of stocks’ market values match TCS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $14 million in TCS’s case. Olympic Steel, Inc. (NASDAQ:ZEUS) is the most popular stock in this table. On the other hand JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) is the least popular one with only 6 bullish hedge fund positions. Container Store Group Inc (NYSE:TCS) 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 ZEUS might be a better candidate to consider taking a long position in.