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Hedge Funds Are Getting Tired Of Town Sports International Holdings, Inc. (CLUB)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Town Sports International Holdings, Inc. (NASDAQ:CLUB).

Town Sports International Holdings, Inc. (NASDAQ:CLUB) was in 4 hedge funds’ portfolios at the end of March. CLUB investors should pay attention to a decrease in support from the world’s most elite money managers of late. There were 5 hedge funds in our database with CLUB holdings at the end of the previous quarter. Our calculations also showed that CLUB 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.

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 monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the key hedge fund action surrounding Town Sports International Holdings, Inc. (NASDAQ:CLUB).

How have hedgies been trading Town Sports International Holdings, Inc. (NASDAQ:CLUB)?

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in CLUB a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the most valuable position in Town Sports International Holdings, Inc. (NASDAQ:CLUB). Renaissance Technologies has a $1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Alexander Medina Seaver of Stadium Capital Management, with a $0.5 million position; 0.3% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish consist of Scott Wallace’s Wallace Capital Management, David Harding’s Winton Capital Management and . In terms of the portfolio weights assigned to each position Stadium Capital Management allocated the biggest weight to Town Sports International Holdings, Inc. (NASDAQ:CLUB), around 0.28% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to CLUB.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CLUB as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks similar to Town Sports International Holdings, Inc. (NASDAQ:CLUB). These stocks are Sundance Energy Inc. (NASDAQ:SNDE), Emerson Radio Corp (NYSE:MSN), U.S. Global Investors, Inc. (NASDAQ:GROW), and Pioneer Power Solutions, Inc. (NASDAQ:PPSI). This group of stocks’ market caps resemble CLUB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNDE 3 842 1
MSN 1 625 -1
GROW 3 1379 0
PPSI 2 58 0
Average 2.25 726 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in CLUB’s case. Sundance Energy Inc. (NASDAQ:SNDE) is the most popular stock in this table. On the other hand Emerson Radio Corp (NYSE:MSN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Town Sports International Holdings, Inc. (NASDAQ:CLUB) 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on CLUB as the stock returned 66% so far in Q2 (through the end of May) 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.