Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Tennant Company (NYSE:TNC)? The smart money sentiment can provide an answer to this question.
Tennant Company (NYSE:TNC) investors should pay attention to an increase in hedge fund sentiment lately. Our calculations also showed that TNC 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to review the latest hedge fund action encompassing Tennant Company (NYSE:TNC).
How are hedge funds trading Tennant Company (NYSE:TNC)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in TNC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Tennant Company (NYSE:TNC), which was worth $38.4 million at the end of the first quarter. On the second spot was GAMCO Investors which amassed $22.9 million worth of shares. Moreover, Citadel Investment Group, Millennium Management, and Arrowstreet Capital were also bullish on Tennant Company (NYSE:TNC), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, specific money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, assembled the largest position in Tennant Company (NYSE:TNC). Renaissance Technologies had $1.5 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.5 million investment in the stock during the quarter. The other funds with brand new TNC positions are D. E. Shaw's D E Shaw, Joel Greenblatt's Gotham Asset Management, and Jeffrey Talpins's Element Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Tennant Company (NYSE:TNC) but similarly valued. These stocks are Trupanion Inc (NASDAQ:TRUP), Southside Bancshares, Inc. (NASDAQ:SBSI), Sandy Spring Bancorp Inc. (NASDAQ:SASR), and Loral Space & Communications Ltd. (NASDAQ:LORL). This group of stocks' market caps resemble TNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRUP,13,154788,3 SBSI,7,65153,1 SASR,14,80840,1 LORL,19,544117,1 Average,13.25,211225,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $83 million in TNC's case. Loral Space & Communications Ltd. (NASDAQ:LORL) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 7 bullish hedge fund positions. Tennant Company (NYSE:TNC) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TNC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TNC were disappointed as the stock returned 0.6% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.