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These Hedge Funds Had Impeccable Timing Buying Teekay Tankers Ltd. (TNK)

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Teekay Tankers Ltd. (NYSE:TNK).

Teekay Tankers Ltd. (NYSE:TNK) was in 18 hedge funds' portfolios at the end of the third quarter of 2019. TNK investors should be aware of an increase in activity from the world's largest hedge funds in recent months. There were 12 hedge funds in our database with TNK positions at the end of the previous quarter. Our calculations also showed that TNK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

At the moment there are a large number of formulas stock market investors can use to evaluate stocks. A duo of the most useful formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top fund managers can beat the market by a solid amount (see the details here).

[caption id="attachment_339352" align="aligncenter" width="500"] Joe Huber of Huber Capital Management[/caption]

Joe Huber - Huber Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the fresh hedge fund action encompassing Teekay Tankers Ltd. (NYSE:TNK).

What does smart money think about Teekay Tankers Ltd. (NYSE:TNK)?

At the end of the third quarter, a total of 18 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 TNK over the last 17 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Teekay Tankers Ltd. (NYSE:TNK), which was worth $9.9 million at the end of the third quarter. On the second spot was Mangrove Partners which amassed $4.9 million worth of shares. AQR Capital Management, Greywolf Capital Management, and Huber Capital Management 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 Greywolf Capital Management allocated the biggest weight to Teekay Tankers Ltd. (NYSE:TNK), around 1.53% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, setting aside 0.59 percent of its 13F equity portfolio to TNK.

Now, some big names were leading the bulls' herd. Mangrove Partners, managed by Nathaniel August, assembled the most valuable position in Teekay Tankers Ltd. (NYSE:TNK). Mangrove Partners had $4.9 million invested in the company at the end of the quarter. Jon Bauer's Contrarian Capital also made a $0.2 million investment in the stock during the quarter. The other funds with brand new TNK positions are Andrew Weiss's Weiss Asset Management, Peter Algert and Kevin Coldiron's Algert Coldiron Investors, and Andre F. Perold's HighVista Strategies.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Teekay Tankers Ltd. (NYSE:TNK) but similarly valued. We will take a look at Clearwater Paper Corporation (NYSE:CLW), MagnaChip Semiconductor Corporation (NYSE:MX), Lawson Products, Inc. (NASDAQ:LAWS), and Sterling Construction Company, Inc. (NASDAQ:STRL). This group of stocks' market valuations are closest to TNK's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLW,7,20731,-1 MX,19,138277,-2 LAWS,7,16177,2 STRL,12,46140,-2 Average,11.25,55331,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $30 million in TNK's case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand Clearwater Paper Corporation (NYSE:CLW) is the least popular one with only 7 bullish hedge fund positions. Teekay Tankers Ltd. (NYSE:TNK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TNK as the stock returned 81.7% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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