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Is RTW Retailwinds, Inc. (RTW) Going to Burn These Hedge Funds?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded RTW Retailwinds, Inc. (NYSE:RTW) based on those filings.

Hedge fund interest in RTW Retailwinds, Inc. (NYSE:RTW) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare RTW to other stocks including IT Tech Packaging, Inc. (NYSE:ITP), Lianluo Smart Limited (NASDAQ:LLIT), and Ascena Retail Group Inc (NASDAQ:ASNA) to get a better sense of its popularity.

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 51 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.

Chuck Royce

Chuck Royce of Royce & Associates

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. With all of this in mind we’re going to review the recent hedge fund action surrounding RTW Retailwinds, Inc. (NYSE:RTW).

Hedge fund activity in RTW Retailwinds, Inc. (NYSE:RTW)

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in RTW 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in RTW Retailwinds, Inc. (NYSE:RTW). Renaissance Technologies has a $0.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, managed by Chuck Royce, which holds a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism encompass Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to RTW Retailwinds, Inc. (NYSE:RTW), around 0.0016% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0004 percent of its 13F equity portfolio to RTW.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Emancipation Capital. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as RTW Retailwinds, Inc. (NYSE:RTW) but similarly valued. These stocks are IT Tech Packaging, Inc. (NYSE:ITP), Lianluo Smart Limited (NASDAQ:LLIT), Ascena Retail Group Inc (NASDAQ:ASNA), and Sequential Brands Group Inc (NASDAQ:SQBG). This group of stocks’ market caps match RTW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITP 1 70 -1
LLIT 1 10 0
ASNA 9 3003 0
SQBG 3 1742 -1
Average 3.5 1206 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in RTW’s case. Ascena Retail Group Inc (NASDAQ:ASNA) is the most popular stock in this table. On the other hand IT Tech Packaging, Inc. (NYSE:ITP) is the least popular one with only 1 bullish hedge fund positions. RTW Retailwinds, Inc. (NYSE:RTW) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on RTW as the stock returned 114.3% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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