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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Terreno Realty Corporation (NYSE:TRNO) based on that data and determine whether they were really smart about the stock.
Is Terreno Realty Corporation (NYSE:TRNO) going to take off soon? The smart money was taking a pessimistic view. The number of bullish hedge fund positions were cut by 4 recently. Our calculations also showed that TRNO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TRNO was in 10 hedge funds' portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with TRNO holdings at the end of the previous quarter.
Video: 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
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Donald Sussman of Paloma Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's review the key hedge fund action encompassing Terreno Realty Corporation (NYSE:TRNO).
What does smart money think about Terreno Realty Corporation (NYSE:TRNO)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TRNO over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Israel Englander's Millennium Management has the largest position in Terreno Realty Corporation (NYSE:TRNO), worth close to $9.2 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Renaissance Technologies, with a $8.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Ken Griffin's Citadel Investment Group, John Overdeck and David Siegel's Two Sigma Advisors and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Qtron Investments allocated the biggest weight to Terreno Realty Corporation (NYSE:TRNO), around 0.13% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to TRNO.
Due to the fact that Terreno Realty Corporation (NYSE:TRNO) has experienced bearish sentiment from the smart money, logic holds that there was a specific group of hedge funds that decided to sell off their positions entirely last quarter. Intriguingly, David Harding's Winton Capital Management cut the largest position of the "upper crust" of funds tracked by Insider Monkey, comprising close to $2.4 million in stock. Karim Abbadi and Edward McBride's fund, Centiva Capital, also cut its stock, about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Terreno Realty Corporation (NYSE:TRNO) but similarly valued. We will take a look at BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), Zai Lab Limited (NASDAQ:ZLAB), Cullen/Frost Bankers, Inc. (NYSE:CFR), and First Citizens BancShares Inc. (NASDAQ:FCNCA). This group of stocks' market values resemble TRNO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BJ,26,156840,4 ZLAB,22,364537,-4 CFR,18,40108,0 FCNCA,17,129488,-6 Average,20.75,172743,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $26 million in TRNO's case. BJ's Wholesale Club Holdings, Inc. (NYSE:BJ) is the most popular stock in this table. On the other hand First Citizens BancShares Inc. (NASDAQ:FCNCA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Terreno Realty Corporation (NYSE:TRNO) is even less popular than FCNCA. Hedge funds dodged a bullet by taking a bearish stance towards TRNO. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately TRNO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TRNO investors were disappointed as the stock returned 2.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.