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Were Hedge Funds Right About Tiffany & Co. (TIF)?

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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Tiffany & Co. (NYSE:TIF) based on that data.

Tiffany & Co. (NYSE:TIF) was in 62 hedge funds’ portfolios at the end of December. TIF shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 32 hedge funds in our database with TIF positions at the end of the previous quarter. Our calculations also showed that TIF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick.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. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Tiffany & Co. (NYSE:TIF).

What have hedge funds been doing with Tiffany & Co. (NYSE:TIF)?

Heading into the first quarter of 2020, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 94% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in TIF a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Clint Carlson’s Carlson Capital has the most valuable position in Tiffany & Co. (NYSE:TIF), worth close to $224.6 million, amounting to 4.1% of its total 13F portfolio. Sitting at the No. 2 spot is Pentwater Capital Management, managed by Matthew Halbower, which holds a $192.8 million position; 3.2% of its 13F portfolio is allocated to the company. Other peers with similar optimism consist of Alec Litowitz and Ross Laser’s Magnetar Capital, Robert Emil Zoellner’s Alpine Associates and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Twin Capital Management allocated the biggest weight to Tiffany & Co. (NYSE:TIF), around 22.21% of its 13F portfolio. Sand Grove Capital Partners is also relatively very bullish on the stock, dishing out 14.88 percent of its 13F equity portfolio to TIF.

As aggregate interest increased, key money managers were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, initiated the most valuable position in Tiffany & Co. (NYSE:TIF). Carlson Capital had $224.6 million invested in the company at the end of the quarter. Matthew Halbower’s Pentwater Capital Management also initiated a $192.8 million position during the quarter. The other funds with brand new TIF positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Robert Emil Zoellner’s Alpine Associates, and James Dinan’s York Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tiffany & Co. (NYSE:TIF) but similarly valued. We will take a look at Discovery, Inc. (NASDAQ:DISCK), Grifols SA (NASDAQ:GRFS), NortonLifeLock Inc. (NASDAQ:NLOK), and Roku, Inc. (NASDAQ:ROKU). This group of stocks’ market values are closest to TIF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DISCK 33 948913 0
GRFS 21 767478 -1
NLOK 46 1623946 5
ROKU 34 231771 -5
Average 33.5 893027 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $893 million. That figure was $2224 million in TIF’s case. NortonLifeLock Inc. (NASDAQ:NLOK) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Tiffany & Co. (NYSE:TIF) is more popular among hedge funds. 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 lost 1.0% in 2020 through April 20th but still managed to beat the market by 11 percentage points. Hedge funds were also right about betting on TIF, though not to the same extent, as the stock returned -3% in 2020 (through April 20th) and outperformed the market as well.
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.

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