Should You Buy Town Sports International Holdings, Inc. (CLUB)?

Is Town Sports International Holdings, Inc. (NASDAQ:CLUB) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Town Sports International Holdings, Inc. (NASDAQ:CLUB) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Bluerock Residential Growth REIT Inc (NYSEMKT:BRG), DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), and Flexsteel Industries, Inc. (NASDAQ:FLXS) to gather more data points.

Today there are a multitude of methods investors can use to value publicly traded companies. A couple of the most innovative methods are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outperform the S&P 500 by a solid margin (see the details here).

Parag Vora - HG Vora Capital

Let’s take a gander at the new hedge fund action encompassing Town Sports International Holdings, Inc. (NASDAQ:CLUB).

How have hedgies been trading Town Sports International Holdings, Inc. (NASDAQ:CLUB)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in CLUB over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CLUB Positions

Among these funds, HG Vora Capital Management held the most valuable stake in Town Sports International Holdings, Inc. (NASDAQ:CLUB), which was worth $73.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $19.9 million worth of shares. Moreover, Stadium Capital Management, Arrowstreet Capital, and AQR Capital Management were also bullish on Town Sports International Holdings, Inc. (NASDAQ:CLUB), allocating a large percentage of their portfolios to this stock.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Ellington. 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 PEAK6 Capital Management).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Town Sports International Holdings, Inc. (NASDAQ:CLUB) but similarly valued. These stocks are Bluerock Residential Growth REIT Inc (NYSE:BRG), DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), Flexsteel Industries, Inc. (NASDAQ:FLXS), and Key Energy Services, Inc. (NYSE:KEG). This group of stocks’ market values match CLUB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BRG 5 14011 -2
DZSI 2 2428 0
FLXS 6 37234 0
KEG 7 51205 0
Average 5 26220 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $111 million in CLUB’s case. Key Energy Services, Inc. (NYSE:KEG) is the most popular stock in this table. On the other hand DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Town Sports International Holdings, Inc. (NASDAQ:CLUB) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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