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Should You Buy The Lovesac Company (LOVE)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about The Lovesac Company (NASDAQ:LOVE)?

Hedge fund interest in The Lovesac Company (NASDAQ:LOVE) 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 LOVE to other stocks including Reading International, Inc. (NASDAQ:RDI), Tailored Brands, Inc. (NYSE:TLRD), and Servicesource International Inc (NASDAQ:SREV) to get a better sense of its popularity.

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 58 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.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

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 trades like this one. 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 The Lovesac Company (NASDAQ:LOVE).

Hedge fund activity in The Lovesac Company (NASDAQ:LOVE)

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in LOVE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LOVE A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in The Lovesac Company (NASDAQ:LOVE), worth close to $3.1 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Skylands Capital, managed by Charles Paquelet, which holds a $2.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Israel Englander’s Millennium Management, and Ken Griffin’s 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 0.64% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to LOVE.

Due to the fact that The Lovesac Company (NASDAQ:LOVE) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $6.2 million in stock. Brandon Osten’s fund, Venator Capital Management, also said goodbye to its stock, about $1.7 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Lovesac Company (NASDAQ:LOVE) but similarly valued. These stocks are Reading International, Inc. (NASDAQ:RDI), Tailored Brands, Inc. (NYSE:TLRD), Servicesource International Inc (NASDAQ:SREV), and Postal Realty Trust, Inc. (NYSE:PSTL). All of these stocks’ market caps are similar to LOVE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RDI 12 10016 1
TLRD 6 9030 -6
SREV 12 20636 -2
PSTL 4 18028 0
Average 8.5 14428 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $7 million in LOVE’s case. Reading International, Inc. (NASDAQ:RDI) is the most popular stock in this table. On the other hand Postal Realty Trust, Inc. (NYSE:PSTL) 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 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 still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on LOVE as the stock returned 265.7% during the second quarter and outperformed the market by an even larger margin.

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