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Hedge Funds Are Betting On Tuesday Morning Corporation (TUES)

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Tuesday Morning Corporation (NASDAQ:TUES) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that TUES isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to view the fresh hedge fund action regarding Tuesday Morning Corporation (NASDAQ:TUES).

What have hedge funds been doing with Tuesday Morning Corporation (NASDAQ:TUES)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TUES over the last 17 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, Renaissance Technologies has the most valuable position in Tuesday Morning Corporation (NASDAQ:TUES), worth close to $2.4 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by David E. Shaw, which holds a $1.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of Chuck Royce’s Royce & Associates, David Harding’s Winton Capital Management and Adam Usdan’s Trellus Management Company. In terms of the portfolio weights assigned to each position Trellus Management Company allocated the biggest weight to Tuesday Morning Corporation (NASDAQ:TUES), around 0.24% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to TUES.

Consequently, key hedge funds have jumped into Tuesday Morning Corporation (NASDAQ:TUES) headfirst. Winton Capital Management, managed by David Harding, established the largest position in Tuesday Morning Corporation (NASDAQ:TUES). Winton Capital Management had $0.5 million invested in the company at the end of the quarter. Adam Usdan’s Trellus Management Company also initiated a $0.2 million position during the quarter. The other funds with brand new TUES positions are Israel Englander’s Millennium Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to Tuesday Morning Corporation (NASDAQ:TUES). We will take a look at Superior Industries International Inc. (NYSE:SUP), Orgenesis Inc. (NASDAQ:ORGS), Apollo Endosurgery, Inc. (NASDAQ:APEN), and Dover Motorsports, Inc. (NYSE:DVD). This group of stocks’ market values match TUES’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SUP 16 13920 1
ORGS 1 685 0
APEN 3 6392 0
DVD 4 7197 0
Average 6 7049 0.25

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 $7 million. That figure was $5 million in TUES’s case. Superior Industries International Inc. (NYSE:SUP) is the most popular stock in this table. On the other hand Orgenesis Inc. (NASDAQ:ORGS) is the least popular one with only 1 bullish hedge fund positions. Tuesday Morning Corporation (NASDAQ:TUES) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TUES wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TUES were disappointed as the stock returned 0.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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