Were Hedge Funds Have Right About Tilray, Inc. (TLRY)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Tilray, Inc. (NASDAQ:TLRY).

Tilray, Inc. (NASDAQ:TLRY) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of December. At the end of this article we will also compare TLRY to other stocks including CSG Systems International, Inc. (NASDAQ:CSGS), Cardiovascular Systems Inc (NASDAQ:CSII), and Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) to get a better sense of its popularity.

Today there are several gauges stock market investors use to evaluate publicly traded companies. A pair of the most underrated gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform the S&P 500 by a superb amount (see the details here).


Louis Bacon Moore of Moore Capital

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the new hedge fund action encompassing Tilray, Inc. (NASDAQ:TLRY).

Hedge fund activity in Tilray, Inc. (NASDAQ:TLRY)

Heading into the first quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in TLRY 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.

Among these funds, Citadel Investment Group held the most valuable stake in Tilray, Inc. (NASDAQ:TLRY), which was worth $17.4 million at the end of the third quarter. On the second spot was Antara Capital which amassed $8.7 million worth of shares. Zevenbergen Capital Investments, Millennium Management, and Granite Point Capital 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 Antara Capital allocated the biggest weight to Tilray, Inc. (NASDAQ:TLRY), around 1.77% of its 13F portfolio. Granite Point Capital is also relatively very bullish on the stock, designating 0.89 percent of its 13F equity portfolio to TLRY.

Due to the fact that Tilray, Inc. (NASDAQ:TLRY) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that elected to cut their entire stakes last quarter. Intriguingly, Noah Levy and Eugene Dozortsev’s Newtyn Management cut the biggest stake of the 750 funds followed by Insider Monkey, totaling close to $32 million in stock. Himanshu Gulati’s fund, Antara Capital, also dropped its stock, about $17.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tilray, Inc. (NASDAQ:TLRY) but similarly valued. We will take a look at CSG Systems International, Inc. (NASDAQ:CSGS), Cardiovascular Systems Inc (NASDAQ:CSII), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), and Eventbrite, Inc. (NYSE:EB). This group of stocks’ market valuations are closest to TLRY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSGS 23 238394 3
CSII 16 135257 -1
KLIC 22 340478 2
EB 24 321993 1
Average 21.25 259031 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $41 million in TLRY’s case. Eventbrite, Inc. (NYSE:EB) is the most popular stock in this table. On the other hand Cardiovascular Systems Inc (NASDAQ:CSII) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Tilray, Inc. (NASDAQ:TLRY) is even less popular than CSII. Hedge funds dodged a bullet by taking a bearish stance towards TLRY. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately TLRY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TLRY investors were disappointed as the stock returned -65.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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