Hedge Funds Have Never Been More Bullish On Tredegar Corporation (TG)
Does Tredegar Corporation (NYSE:TG) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Tredegar Corporation (NYSE:TG) worth your attention right now? The best stock pickers are betting on the stock. The number of bullish hedge fund positions went up by 1 recently. Our calculations also showed that TG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TG was in 12 hedge funds' portfolios at the end of the third quarter of 2019. There were 11 hedge funds in our database with TG positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_375529" align="aligncenter" width="450"]
Mario Gabelli of GAMCO Investors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to take a look at the recent hedge fund action regarding Tredegar Corporation (NYSE:TG).
How have hedgies been trading Tredegar Corporation (NYSE:TG)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TG over the last 17 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in Tredegar Corporation (NYSE:TG), which was worth $64.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $3.4 million worth of shares. Renaissance Technologies, Royce & Associates, and Two Sigma Advisors 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 Zebra Capital Management allocated the biggest weight to Tredegar Corporation (NYSE:TG), around 0.58% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to TG.
Consequently, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most outsized position in Tredegar Corporation (NYSE:TG). Millennium Management had $0.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $0.3 million position during the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Tredegar Corporation (NYSE:TG) but similarly valued. These stocks are Akero Therapeutics, Inc. (NASDAQ:AKRO), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Customers Bancorp Inc (NYSE:CUBI), and National CineMedia, Inc. (NASDAQ:NCMI). This group of stocks' market valuations match TG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AKRO,10,104249,-5 NTLA,11,13017,-1 CUBI,12,47860,0 NCMI,17,52383,1 Average,12.5,54377,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $73 million in TG's case. National CineMedia, Inc. (NASDAQ:NCMI) is the most popular stock in this table. On the other hand Akero Therapeutics, Inc. (NASDAQ:AKRO) is the least popular one with only 10 bullish hedge fund positions. Tredegar Corporation (NYSE:TG) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on TG, though not to the same extent, as the stock returned 10.3% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
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