Do Hedge Funds Love Tile Shop Hldgs, Inc. (TTS)?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Tile Shop Hldgs, Inc. (NASDAQ:TTS) .

Tile Shop Hldgs, Inc. (NASDAQ:TTS) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. TTS was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with TTS holdings at the end of the previous quarter. At the end of this article we will also compare TTS to other stocks including Endologix, Inc. (NASDAQ:ELGX), Cabot Microelectronics Corporation (NASDAQ:CCMP), and First Merchants Corporation (NASDAQ:FRME) 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.

What have hedge funds been doing with Tile Shop Hldgs, Inc. (NASDAQ:TTS)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 29% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in TTS over the last 5 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.

When looking at the institutional investors followed by Insider Monkey, Tremblant Capital, led by Brett Barakett, holds the biggest position in Tile Shop Hldgs, Inc. (NASDAQ:TTS). Tremblant Capital has a $36.6 million position in the stock, comprising 2% of its 13F portfolio. Coming in second is Jim Simons’ Renaissance Technologies holding a $16.9 million position. Remaining peers with similar optimism encompass Charles Paquelet’s Skylands Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. 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.

Seeing as Tile Shop Hldgs, Inc. (NASDAQ:TTS) has sustained falling interest from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who sold off their entire stakes in the third quarter. Interestingly, Principal Global Investors’ Columbus Circle Investors sold off the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $9.8 million in stock, and Richard Driehaus’ Driehaus Capital was right behind this move, as the fund dumped about $8.5 million worth of shares.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tile Shop Hldgs, Inc. (NASDAQ:TTS) but similarly valued. We will take a look at Endologix, Inc. (NASDAQ:ELGX), Cabot Microelectronics Corporation (NASDAQ:CCMP), First Merchants Corporation (NASDAQ:FRME), and Chesapeake Utilities Corporation (NYSE:CPK). All of these stocks’ market caps match TTS’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $91 million in TTS’s case. Endologix, Inc. (NASDAQ:ELGX) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 10 bullish hedge fund positions. Tile Shop Hldgs, Inc. (NASDAQ:TTS) 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. In this regard ELGX might be a better candidate to consider taking a long position in.

Disclosure: None