Hedge Funds Piled Into Tiffany & Co. (TIF) Prior To Sale Announcement

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Tiffany & Co. (NYSE:TIF).

Tiffany & Co. (NYSE:TIF) shareholders have witnessed an increase in hedge fund interest lately. TIF was in 30 hedge funds' portfolios at the end of September. There were 22 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 Q3 rankings and see the video below for Q2 rankings).

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are perceived as underperforming, outdated financial tools of the past. While there are more than 8000 funds in operation at the moment, Our experts choose to focus on the masters of this group, around 750 funds. Most estimates calculate that this group of people direct the majority of all hedge funds' total asset base, and by tracking their first-class investments, Insider Monkey has figured out many investment strategies that have historically outpaced the market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_783421" align="aligncenter" width="473"]

Ryan Frick of Dorsal Capital[/caption]

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the recent hedge fund action encompassing Tiffany & Co. (NYSE:TIF).

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

At Q3's end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the second quarter of 2019. By comparison, 43 hedge funds held shares or bullish call options in TIF a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Lone Pine Capital was the largest shareholder of Tiffany & Co. (NYSE:TIF), with a stake worth $591.2 million reported as of the end of September. Trailing Lone Pine Capital was Egerton Capital Limited, which amassed a stake valued at $452.4 million. Thunderbird Partners, Holocene Advisors, and Dorsal Capital Management 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 Thunderbird Partners allocated the biggest weight to Tiffany & Co. (NYSE:TIF), around 17.45% of its portfolio. Manikay Partners is also relatively very bullish on the stock, setting aside 5.17 percent of its 13F equity portfolio to TIF.

As industrywide interest jumped, key money managers were leading the bulls' herd. Holocene Advisors, managed by Brandon Haley, established the most valuable position in Tiffany & Co. (NYSE:TIF). Holocene Advisors had $65.6 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $6.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Philippe Laffont's Coatue Management, Michael Gelband's ExodusPoint Capital, and Renee Yao's Neo Ivy Capital.

Let's now review hedge fund activity in other stocks similar to Tiffany & Co. (NYSE:TIF). We will take a look at Zebra Technologies Corporation (NASDAQ:ZBRA), NiSource Inc. (NYSE:NI), Rollins, Inc. (NYSE:ROL), and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH). All of these stocks' market caps are closest to TIF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZBRA,18,427751,-2 NI,22,811933,0 ROL,25,306391,2 NCLH,30,1012048,-5 Average,23.75,639531,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $640 million. That figure was $1501 million in TIF's case. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is the most popular stock in this table. On the other hand Zebra Technologies Corporation (NASDAQ:ZBRA) is the least popular one with only 18 bullish hedge fund positions. Tiffany & Co. (NYSE:TIF) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TIF as the stock returned 44.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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