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Do Hedge Funds Love Tenaris S.A. (TS)?

Nina Todic

Is Tenaris S.A. (NYSE:TS) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Is Tenaris S.A. (NYSE:TS) an exceptional investment today? The smart money is selling. The number of bullish hedge fund bets retreated by 2 lately. Our calculations also showed that ts isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Let's take a look at the latest hedge fund action regarding Tenaris S.A. (NYSE:TS).

What have hedge funds been doing with Tenaris S.A. (NYSE:TS)?

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 -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TS over the last 13 quarters. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with TS Positions

Of the funds tracked by Insider Monkey, John Armitage's Egerton Capital Limited has the most valuable position in Tenaris S.A. (NYSE:TS), worth close to $308.9 million, comprising 2.3% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $85.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that are bullish comprise Ken Griffin's Citadel Investment Group, Andreas Halvorsen's Viking Global and John W. Rogers's Ariel Investments.

Judging by the fact that Tenaris S.A. (NYSE:TS) has experienced bearish sentiment from hedge fund managers, it's safe to say that there were a few money managers that slashed their positions entirely last quarter. Interestingly, Todd J. Kantor's Encompass Capital Advisors sold off the biggest investment of the "upper crust" of funds monitored by Insider Monkey, comprising about $25.5 million in stock, and Jim Simons's Renaissance Technologies was right behind this move, as the fund dropped about $24.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Tenaris S.A. (NYSE:TS). We will take a look at Regions Financial Corporation (NYSE:RF), TransDigm Group Incorporated (NYSE:TDG), Verisign, Inc. (NASDAQ:VRSN), and Expedia Group, Inc. (NASDAQ:EXPE). This group of stocks' market valuations match TS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RF,31,951749,-10 TDG,48,3883567,7 VRSN,29,4820588,4 EXPE,37,3118988,-1 Average,36.25,3193723,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $3.19 billion. That figure was $687 million in TS's case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Verisign, Inc. (NASDAQ:VRSN) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Tenaris S.A. (NYSE:TS) is even less popular than VRSN. 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.

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