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Do Hedge Funds Love Tilly’s Inc (TLYS)?

In this article we will check out the progression of hedge fund sentiment towards Tilly’s Inc (NYSE:TLYS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Tilly’s Inc (NYSE:TLYS) shareholders have witnessed a decrease in hedge fund interest of late. Our calculations also showed that TLYS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the recent hedge fund action encompassing Tilly’s Inc (NYSE:TLYS).

Hedge fund activity in Tilly’s Inc (NYSE:TLYS)

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in TLYS a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Steven Baughman’s Divisar Capital has the largest position in Tilly’s Inc (NYSE:TLYS), worth close to $9 million, corresponding to 3.5% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $7.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Tilly’s Inc (NYSE:TLYS), around 3.53% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, setting aside 0.26 percent of its 13F equity portfolio to TLYS.

Judging by the fact that Tilly’s Inc (NYSE:TLYS) has faced declining sentiment from the smart money, logic holds that there exists a select few fund managers that decided to sell off their positions entirely heading into Q4. Interestingly, Michael Gelband’s ExodusPoint Capital dropped the biggest investment of all the hedgies watched by Insider Monkey, worth an estimated $0.8 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Tilly’s Inc (NYSE:TLYS). We will take a look at MOGU Inc. (NYSE:MOGU), Apyx Medical Corporation (NASDAQ:APYX), CyberOptics Corporation (NASDAQ:CYBE), and Sequans Communications SA (NYSE:SQNS). This group of stocks’ market caps are closest to TLYS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MOGU 3 12027 1
APYX 9 18070 -1
CYBE 7 14209 1
SQNS 5 20535 1
Average 6 16210 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $25 million in TLYS’s case. Apyx Medical Corporation (NASDAQ:APYX) is the most popular stock in this table. On the other hand MOGU Inc. (NYSE:MOGU) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Tilly’s Inc (NYSE:TLYS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on TLYS as the stock returned 30.3% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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