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Did Hedge Funds Get TransUnion (TRU) Right?

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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards TransUnion (NYSE:TRU) and determine whether hedge funds skillfully traded this stock.

Is TransUnion (NYSE:TRU) an excellent investment right now? Prominent investors were betting on the stock. The number of bullish hedge fund positions advanced by 3 recently. TransUnion (NYSE:TRU) was in 38 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that TRU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let's check out the new hedge fund action regarding TransUnion (NYSE:TRU).


Paul Tudor Jones of Tudor Investment Corp

Do Hedge Funds Think TRU Is A Good Stock To Buy Now?

At third quarter's end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TRU over the last 25 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in TransUnion (NYSE:TRU). Select Equity Group has a $736.7 million position in the stock, comprising 2.5% of its 13F portfolio. Coming in second is BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, which holds a $233.9 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Panayotis Takis Sparaggis's Alkeon Capital Management, Farallon Capital and James Parsons's Junto Capital Management. In terms of the portfolio weights assigned to each position Lansing Management allocated the biggest weight to TransUnion (NYSE:TRU), around 14.13% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, setting aside 4.76 percent of its 13F equity portfolio to TRU.

Consequently, some big names were leading the bulls' herd. TwinBeech Capital, managed by Jinghua Yan, established the most valuable position in TransUnion (NYSE:TRU). TwinBeech Capital had $7.9 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $4.1 million investment in the stock during the quarter. The following funds were also among the new TRU investors: Thomas Lee's Lee Capital Management, Alec Litowitz and Ross Laser's Magnetar Capital, and Steve Cohen's Point72 Asset Management.

Let's now review hedge fund activity in other stocks similar to TransUnion (NYSE:TRU). These stocks are Mid America Apartment Communities Inc (NYSE:MAA), PPL Corporation (NYSE:PPL), Sun Communities Inc (NYSE:SUI), Martin Marietta Materials, Inc. (NYSE:MLM), Fox Corporation (NASDAQ:FOX), Edison International (NYSE:EIX), and Fortis Inc. (NYSE:FTS). This group of stocks' market valuations are similar to TRU's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAA,22,254912,8 PPL,20,140767,-3 SUI,33,794559,3 MLM,42,2154281,8 FOX,25,665945,0 EIX,25,1240177,7 FTS,5,171234,-4 Average,24.6,774554,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $775 million. That figure was $2181 million in TRU's case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 5 bullish hedge fund positions. TransUnion (NYSE:TRU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRU is 76.8. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, TRU wasn't nearly as popular as these 5 stocks and hedge funds that were betting on TRU were disappointed as the stock returned -8.1% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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