In this article we will check out the progression of hedge fund sentiment towards Tailored Brands, Inc. (NYSE:TLRD) 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.
Tailored Brands, Inc. (NYSE:TLRD) has experienced a decrease in enthusiasm from smart money in recent months. TLRD was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with TLRD holdings at the end of the previous quarter. Our calculations also showed that TLRD 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
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 let’s take a gander at the key hedge fund action surrounding Tailored Brands, Inc. (NYSE:TLRD).
What does smart money think about Tailored Brands, Inc. (NYSE:TLRD)?
Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TLRD over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Scion Asset Management was the largest shareholder of Tailored Brands, Inc. (NYSE:TLRD), with a stake worth $7 million reported as of the end of September. Trailing Scion Asset Management was Two Sigma Advisors, which amassed a stake valued at $1.1 million. Citadel Investment Group, OZ Management, and JS Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to Tailored Brands, Inc. (NYSE:TLRD), around 8.1% of its 13F portfolio. JS Capital is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to TLRD.
Seeing as Tailored Brands, Inc. (NYSE:TLRD) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there is a sect of hedge funds that slashed their positions entirely by the end of the first quarter. It’s worth mentioning that Anthony Bozza’s Lakewood Capital Management dropped the largest investment of all the hedgies followed by Insider Monkey, worth close to $2.4 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $2.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds by the end of the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tailored Brands, Inc. (NYSE:TLRD) but similarly valued. These stocks are Servicesource International Inc (NASDAQ:SREV), Postal Realty Trust, Inc. (NYSE:PSTL), Frequency Electronics, Inc. (NASDAQ:FEIM), and Harvard Bioscience, Inc. (NASDAQ:HBIO). This group of stocks’ market values are closest to TLRD’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $9 million in TLRD’s case. Servicesource International Inc (NASDAQ:SREV) is the most popular stock in this table. On the other hand Frequency Electronics, Inc. (NASDAQ:FEIM) is the least popular one with only 3 bullish hedge fund positions. Tailored Brands, Inc. (NYSE:TLRD) 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. 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 gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately TLRD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TLRD investors were disappointed as the stock returned -28.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.