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Did Hedge Funds Drop The Ball On TriNet Group Inc (TNET) ?

Asma UL Husna

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about TriNet Group Inc (NYSE:TNET).

TriNet Group Inc (NYSE:TNET) has seen a decrease in activity from the world's largest hedge funds of late. TNET was in 17 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 21 hedge funds in our database with TNET positions at the end of the previous quarter. Our calculations also showed that TNET isn't among the 30 most popular stocks among hedge funds.

According to most traders, hedge funds are seen as underperforming, outdated financial tools of the past. While there are greater than 8000 funds in operation today, Our experts choose to focus on the elite of this club, about 750 funds. These money managers administer the lion's share of the smart money's total asset base, and by following their unrivaled stock picks, Insider Monkey has formulated many investment strategies that have historically exceeded the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

William Von Mueffling - Cantillon Capital Management

Let's check out the fresh hedge fund action regarding TriNet Group Inc (NYSE:TNET).

Hedge fund activity in TriNet Group Inc (NYSE:TNET)

At Q4's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TNET over the last 14 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

TNET_apr2019

When looking at the institutional investors followed by Insider Monkey, Cantillon Capital Management, managed by William von Mueffling, holds the most valuable position in TriNet Group Inc (NYSE:TNET). Cantillon Capital Management has a $178.7 million position in the stock, comprising 2.2% of its 13F portfolio. Coming in second is Harbor Spring Capital, managed by Amit Nitin Doshi, which holds a $18.4 million position; 2.4% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions consist of D. E. Shaw's D E Shaw, John Overdeck and David Siegel's Two Sigma Advisors and Jim Simons's Renaissance Technologies.

Due to the fact that TriNet Group Inc (NYSE:TNET) has faced a decline in interest from hedge fund managers, it's easy to see that there is a sect of funds who sold off their full holdings in the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the largest investment of the "upper crust" of funds followed by Insider Monkey, valued at close to $21.4 million in stock, and Louis Navellier's Navellier & Associates was right behind this move, as the fund dropped about $1.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 4 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as TriNet Group Inc (NYSE:TNET) but similarly valued. These stocks are Mednax Inc. (NYSE:MD), Hancock Whitney Corporation (NASDAQ:HWC), LHC Group, Inc. (NASDAQ:LHCG), and Valley National Bancorp (NASDAQ:VLY). All of these stocks' market caps match TNET's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MD,25,480820,0 HWC,15,111721,-9 LHCG,27,111944,2 VLY,8,14064,0 Average,18.75,179637,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $234 million in TNET's case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand Valley National Bancorp (NASDAQ:VLY) is the least popular one with only 8 bullish hedge fund positions. TriNet Group Inc (NYSE:TNET) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on TNET as the stock returned 45.4% and outperformed the market by an even larger margin.

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

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