Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Tutor Perini Corp (NYSE:TPC) going to take off soon? Investors who are in the know are in a bearish mood. The number of long hedge fund bets went down by 6 recently. Our calculations also showed that TPC isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the latest hedge fund action encompassing Tutor Perini Corp (NYSE:TPC).
What does smart money think about Tutor Perini Corp (NYSE:TPC)?
At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TPC over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Tutor Perini Corp (NYSE:TPC), with a stake worth $5.8 million reported as of the end of March. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $1.5 million. Two Sigma Advisors, D E Shaw, and Zebra Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Tutor Perini Corp (NYSE:TPC) has faced declining sentiment from the smart money, it's safe to say that there were a few money managers who were dropping their entire stakes last quarter. It's worth mentioning that Ken Grossman and Glen Schneider's SG Capital Management dumped the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $9.3 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $0.9 million worth. These transactions are important to note, as total hedge fund interest fell by 6 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Tutor Perini Corp (NYSE:TPC). These stocks are Allegiance Bancshares, Inc. (NASDAQ:ABTX), RadNet Inc. (NASDAQ:RDNT), Ituran Location and Control Ltd. (NASDAQ:ITRN), and Global Cord Blood Corp (NYSE:CO). All of these stocks' market caps match TPC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABTX,6,20638,-1 RDNT,11,76639,-3 ITRN,13,120395,2 CO,9,29013,1 Average,9.75,61671,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $9 million in TPC's case. Ituran Location and Control Ltd. (NASDAQ:ITRN) is the most popular stock in this table. On the other hand Allegiance Bancshares, Inc. (NASDAQ:ABTX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Tutor Perini Corp (NYSE:TPC) is even less popular than ABTX. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on TPC, though not to the same extent, as the stock returned 3.3% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.