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

The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Tilray, Inc. (NASDAQ:TLRY), and what that likely means for the prospects of the company and its stock.

Tilray, Inc. (NASDAQ:TLRY) was in 10 hedge funds’ portfolios at the end of March. TLRY investors should be aware of an increase in enthusiasm from smart money of late. There were 8 hedge funds in our database with TLRY positions at the end of the previous quarter. Our calculations also showed that tlry isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We’re going to take a glance at the key hedge fund action encompassing Tilray, Inc. (NASDAQ:TLRY).

What have hedge funds been doing with Tilray, Inc. (NASDAQ:TLRY)?

At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TLRY over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with TLRY Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Tilray, Inc. (NASDAQ:TLRY). Citadel Investment Group has a $66.1 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Newtyn Management, led by Noah Levy and Eugene Dozortsev, holding a $8.2 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Daniel S. Och’s OZ Management, William C. Martin’s Raging Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.

As one would reasonably expect, specific money managers were leading the bulls’ herd. OZ Management, managed by Daniel S. Och, established the most valuable position in Tilray, Inc. (NASDAQ:TLRY). OZ Management had $3.9 million invested in the company at the end of the quarter. William C. Martin’s Raging Capital Management also initiated a $3.3 million position during the quarter. The other funds with brand new TLRY positions are Matthew Hulsizer’s PEAK6 Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Noam Gottesman’s GLG Partners.

Let’s now review hedge fund activity in other stocks similar to Tilray, Inc. (NASDAQ:TLRY). We will take a look at Old Republic International Corporation (NYSE:ORI), Integrated Device Technology, Inc. (NASDAQ:IDTI), Aluminum Corp. of China Limited (NYSE:ACH), and GrubHub Inc (NYSE:GRUB). This group of stocks’ market caps resemble TLRY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORI 19 432254 -4
IDTI 29 1393513 -6
ACH 4 5548 0
GRUB 32 742868 9
Average 21 643546 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $644 million. That figure was $22 million in TLRY’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. Tilray, Inc. (NASDAQ:TLRY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TLRY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TLRY investors were disappointed as the stock returned -30.6% 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 13 of these stocks already outperformed the market so far in Q2.

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

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