U.S. Markets open in 6 hrs 16 mins

Should You Buy Trustmark Corp (TRMK)?

Abigail Fisher

It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Trustmark Corp (NASDAQ:TRMK) during the quarter below.

Trustmark Corp (NASDAQ:TRMK) investors should pay attention to an increase in activity from the world's largest hedge funds of late. TRMK was in 11 hedge funds' portfolios at the end of the third quarter of 2018. There were 10 hedge funds in our database with TRMK holdings at the end of the previous quarter. Our calculations also showed that TRMK isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Let's take a look at the key hedge fund action regarding Trustmark Corp (NASDAQ:TRMK).

How are hedge funds trading Trustmark Corp (NASDAQ:TRMK)?

At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2018. By comparison, 7 hedge funds held shares or bullish call options in TRMK heading into this year. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TRMK_dec2018

Among these funds, Millennium Management held the most valuable stake in Trustmark Corp (NASDAQ:TRMK), which was worth $13.1 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $6.5 million worth of shares. Moreover, GLG Partners, AQR Capital Management, and Two Sigma Advisors were also bullish on Trustmark Corp (NASDAQ:TRMK), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, specific money managers have jumped into Trustmark Corp (NASDAQ:TRMK) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized call position in Trustmark Corp (NASDAQ:TRMK). Citadel Investment Group had $0.4 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also made a $0.3 million investment in the stock during the quarter.

Let's check out hedge fund activity in other stocks similar to Trustmark Corp (NASDAQ:TRMK). These stocks are Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), B2Gold Corp (NYSE:BTG), Cambrex Corporation (NYSE:CBM), and Compass Minerals International, Inc. (NYSE:CMP). All of these stocks' market caps resemble TRMK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARNA,25,411535,2 BTG,14,65025,2 CBM,17,46892,2 CMP,11,117405,-1 Average,16.75,160214,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $32 million in TRMK's case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Compass Minerals International, Inc. (NYSE:CMP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Trustmark Corp (NASDAQ:TRMK) is even less popular than CMP. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

Related Content