The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Terreno Realty Corporation (NYSE:TRNO) from the perspective of those elite 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.
Let's check out the new hedge fund action encompassing Terreno Realty Corporation (NYSE:TRNO).
Hedge fund activity in Terreno Realty Corporation (NYSE:TRNO)
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in TRNO 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.
More specifically, Millennium Management was the largest shareholder of Terreno Realty Corporation (NYSE:TRNO), with a stake worth $27.3 million reported as of the end of March. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $9.1 million. Renaissance Technologies, Two Sigma Advisors, and Impax Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, specific money managers were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Terreno Realty Corporation (NYSE:TRNO). Marshall Wace LLP had $1.7 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new TRNO investors: Matthew Tewksbury's Stevens Capital Management and Dmitry Balyasny's Balyasny Asset Management.
Let's now review hedge fund activity in other stocks similar to Terreno Realty Corporation (NYSE:TRNO). These stocks are Alliance Resource Partners, L.P. (NASDAQ:ARLP), California Water Service Group (NYSE:CWT), CNO Financial Group Inc (NYSE:CNO), and Agree Realty Corporation (NYSE:ADC). This group of stocks' market valuations match TRNO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARLP,8,108477,0 CWT,8,22601,0 CNO,13,158581,2 ADC,8,36435,-3 Average,9.25,81524,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $63 million in TRNO's case. CNO Financial Group Inc (NYSE:CNO) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only 8 bullish hedge fund positions. Terreno Realty Corporation (NYSE:TRNO) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on TRNO as the stock returned 15.3% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.