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Hedge Funds Surely Excited As Container Store Group Inc (TCS) Dips Despite Posting Stronger-Than-Expected Earnings Results

The shares of Container Store Group Inc (NYSE:TCS) soared in excess of 8% in trading this morning after the storage product retailer exceeded the markets’ earnings expectations for its fiscal first quarter 2015 financial results for the period ending May 31. But then a funny thing happened; the shares did an abrupt about face and dropped like a rock, bringing them beneath where they started the day, down by 0.40%. The company announced a net loss per share of $0.11 against Wall Streets’ estimates of a loss of $0.13, although the firm fell short of revenue expectations of $173.56 million with reported revenue of $169.83 million. The net sales of Container Store Group for the first quarter declined 2.1% on a year-over-year basis; however, its gross margins came in higher, at 58.5%, with a growth of 40 basis points in comparison to the same quarter one year earlier. The specialty retailer was able to outmatch its quarterly outlook under which it predicted a loss of $0.12 to $0.14 during the period. While discussing the firm’s financial outlook, Kip Tindell, Chairman and Chief Executive Officer of Container Store Group Inc (NYSE:TCS), said, “We remain confident in, and are maintaining, our previously stated sales and EPS outlook for the fiscal year.” Container Store is expecting net sales of $800 million to $815 million in fiscal 2015 along with net income of $0.30 to $0.38 per diluted common share.


The shares of Container Store Group Inc (NYSE:TCS) have declined by 9.15% year-to-date but the smart money has a positive outlook on the stock. At the end of the first quarter, seven hedge fund managers held aggregate investments of $70.58 million in the company against holdings of $60.75 million from nine hedge fund investors at the end of 2014. So while overall owners dropped, the ones who remained had larger total investments, even as the stock also dipped slightly during the quarter, meaning the company had a few very bullish investors heading into the second quarter.

We don’t just track the latest moves of funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 135%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Insider purchases are known to be an effective indicator of the future stock performance of a company and the insiders at Container Store Group Inc (NYSE:TCS), though there have been no recent insider purchases of the company’s shares. Per von Mentzer, Chief Executive Officer of the company’s Elfa Design Center, sold 500 shares of the storage product manufacturer on January 27.

A positive hedge fund sentiment indicates that hedge fund managers are expecting potential growth in the company. Let’s find out the detailed hedge fund activity concerning the company.

What does Smart Money think about Container Store Group Inc (TCS)?

At the end of the first quarter, a total of seven of the hedge funds tracked by Insider Monkey were long in this stock, a decline of 22% from the fourth quarter’s end. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially.

Sanford J. Colen’s Apex Capital was the largest shareholder of Container Store Group Inc (NYSE:TCS) in our database at the end of the first quarter. The investment manager owned 2.14 million shares of the retailer with a market value of $40.74 million and it accounted for 2.92% of its overall equity portfolio. Chuck Royce’s Royce & Associates came in at number two on the investors’ list with a holding valued at $19.23 million and consisting of 1.00 million shares.  Jim Tarantino and Chris Galvin’s Westerly Capital Management and Dmitry Balyasny’s Balyasny Asset Management were among the other primary investors of the company. Alexander Mitchell’s Scopus Asset Management initiated a new position in the company of 336,937 shares worth $6.42 million during the first quarter.

With stronger-than-expected quarterly results and slightly positive hedge fund sentiment, we recommend a buy for the shares of Container Group Inc (NYSE:TCS) on its somewhat surprising dip today.

Disclosure: None

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