We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Tapestry, Inc. (NYSE:TPR) and determine whether hedge funds skillfully traded this stock.
Is Tapestry, Inc. (NYSE:TPR) a buy right now? The best stock pickers were in an optimistic mood. The number of long hedge fund positions improved by 2 lately. Tapestry, Inc. (NYSE:TPR) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 40. Our calculations also showed that TPR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 37 hedge funds in our database with TPR holdings at the end of March.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to go over the new hedge fund action regarding Tapestry, Inc. (NYSE:TPR).
What does smart money think about Tapestry, Inc. (NYSE:TPR)?
Heading into the third quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in TPR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Tapestry, Inc. (NYSE:TPR), which was worth $108.7 million at the end of the third quarter. On the second spot was Samlyn Capital which amassed $68.2 million worth of shares. Thunderbird Partners, Antipodes Partners, and D E Shaw 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 Thunderbird Partners allocated the biggest weight to Tapestry, Inc. (NYSE:TPR), around 7.24% of its 13F portfolio. Prentice Capital Management is also relatively very bullish on the stock, designating 4.27 percent of its 13F equity portfolio to TPR.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Thunderbird Partners, managed by David Fear, assembled the most outsized position in Tapestry, Inc. (NYSE:TPR). Thunderbird Partners had $50.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $38.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Ricky Sandler’s Eminence Capital, Michael Zimmerman’s Prentice Capital Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tapestry, Inc. (NYSE:TPR) but similarly valued. We will take a look at Simpson Manufacturing Co, Inc. (NYSE:SSD), Alamos Gold Inc (NYSE:AGI), DouYu International Holdings Limited (NASDAQ:DOYU), Momo Inc (NASDAQ:MOMO), Cogent Communications Holdings Inc. (NASDAQ:CCOI), Parsons Corporation (NYSE:PSN), and Texas Roadhouse Inc (NASDAQ:TXRH). This group of stocks’ market values are closest to TPR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $533 million in TPR’s case. Momo Inc (NASDAQ:MOMO) is the most popular stock in this table. On the other hand DouYu International Holdings Limited (NASDAQ:DOYU) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Tapestry, Inc. (NYSE:TPR) is more popular among hedge funds. Our overall hedge fund sentiment score for TPR is 86.3. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately TPR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TPR were disappointed as the stock returned 10.9% since the end of 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.
Disclosure: None. This article was originally published at Insider Monkey.