At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards The Lovesac Company (NASDAQ:LOVE).
Is The Lovesac Company (LOVE) a good stock to buy now? Money managers were getting less bullish. The number of bullish hedge fund bets fell by 2 recently. The Lovesac Company (NASDAQ:LOVE) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that LOVE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with LOVE positions at the end of the second quarter.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s analyze the new hedge fund action encompassing The Lovesac Company (NASDAQ:LOVE).
Do Hedge Funds Think LOVE Is A Good Stock To Buy Now?
At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in LOVE 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.
The largest stake in The Lovesac Company (NASDAQ:LOVE) was held by Driehaus Capital, which reported holding $12.5 million worth of stock at the end of September. It was followed by Intrinsic Edge Capital with a $9 million position. Other investors bullish on the company included Scopus Asset Management, Skylands Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to The Lovesac Company (NASDAQ:LOVE), around 0.81% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 0.61 percent of its 13F equity portfolio to LOVE.
Seeing as The Lovesac Company (NASDAQ:LOVE) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies that decided to sell off their positions entirely last quarter. At the top of the heap, Brandon Osten’s Venator Capital Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $2.1 million in stock, and Mark Broach’s Manatuck Hill Partners was right behind this move, as the fund cut about $1.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to The Lovesac Company (NASDAQ:LOVE). These stocks are AnaptysBio, Inc. (NASDAQ:ANAB), Allied Motion Technologies, Inc. (NASDAQ:AMOT), Yunji Inc. (NASDAQ:YJ), TFF Pharmaceuticals, Inc. (NASDAQ:TFFP), Waterstone Financial, Inc. (NASDAQ:WSBF), Duluth Holdings Inc. (NASDAQ:DLTH), and Computer Programs & Systems, Inc. (NASDAQ:CPSI). This group of stocks’ market caps match LOVE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANAB | 24 | 241528 | -2 |
| AMOT | 12 | 49767 | -1 |
| YJ | 4 | 1496 | 0 |
| TFFP | 6 | 66934 | 2 |
| WSBF | 10 | 68922 | -4 |
| DLTH | 11 | 13591 | 3 |
| CPSI | 10 | 16006 | -1 |
| Average | 11 | 65463 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $35 million in LOVE’s case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand Yunji Inc. (NASDAQ:YJ) is the least popular one with only 4 bullish hedge fund positions. The Lovesac Company (NASDAQ:LOVE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LOVE is 38. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on LOVE as the stock returned 22% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
