In this article we will check out the progression of hedge fund sentiment towards Travelzoo (NASDAQ:TZOO) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is TZOO a good stock to buy now? Travelzoo (NASDAQ:TZOO) investors should pay attention to a decrease in enthusiasm from smart money lately. Travelzoo (NASDAQ:TZOO) was in 8 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. There were 12 hedge funds in our database with TZOO holdings at the end of June. Our calculations also showed that TZOO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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David Siegel of Two Sigma Advisors
David Siegel of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to take a look at the key hedge fund action surrounding Travelzoo (NASDAQ:TZOO).
How have hedgies been trading Travelzoo (NASDAQ:TZOO)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in TZOO a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Is TZOO A Good Stock To Buy?
More specifically, Renaissance Technologies was the largest shareholder of Travelzoo (NASDAQ:TZOO), with a stake worth $3.5 million reported as of the end of September. Trailing Renaissance Technologies was Invenomic Capital Management, which amassed a stake valued at $2.5 million. Arrowstreet Capital, PEAK6 Capital Management, and Two Sigma Advisors 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 Invenomic Capital Management allocated the biggest weight to Travelzoo (NASDAQ:TZOO), around 1.37% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0035 percent of its 13F equity portfolio to TZOO.
Since Travelzoo (NASDAQ:TZOO) has witnessed falling interest from the smart money, logic holds that there lies a certain "tier" of money managers that elected to cut their entire stakes heading into Q4. Interestingly, Israel Englander's Millennium Management cut the biggest stake of all the hedgies watched by Insider Monkey, totaling close to $0.2 million in stock. David Harding's fund, Winton Capital Management, also dumped its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Travelzoo (NASDAQ:TZOO) but similarly valued. We will take a look at Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX), Cedar Realty Trust Inc (NYSE:CDR), Epsilon Energy Ltd. (NASDAQ:EPSN), FFBW, Inc. (NASDAQ:FFBW), ASLAN Pharmaceuticals Limited (NASDAQ:ASLN), Tantech Holdings Ltd. (NASDAQ:TANH), and Clearside Biomedical, Inc. (NASDAQ:CLSD). This group of stocks' market valuations are closest to TZOO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETTX,5,8357,3 CDR,11,4353,-4 EPSN,2,11939,-2 FFBW,3,3628,1 ASLN,4,3740,-1 TANH,3,1041,1 CLSD,3,1921,0 Average,4.4,4997,-0.3 [/table]
As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $7 million in TZOO's case. Cedar Realty Trust Inc (NYSE:CDR) is the most popular stock in this table. On the other hand Epsilon Energy Ltd. (NASDAQ:EPSN) is the least popular one with only 2 bullish hedge fund positions. Travelzoo (NASDAQ:TZOO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TZOO is 54.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on TZOO as the stock returned 62.2% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
