Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Speedway Motorsports, Inc. (NYSE:TRK) was in 11 hedge funds' portfolios at the end of the fourth quarter of 2018. TRK investors should be aware of a decrease in support from the world's most elite money managers of late. There were 13 hedge funds in our database with TRK positions at the end of the previous quarter. Our calculations also showed that TRK 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' 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let's take a look at the fresh hedge fund action regarding Speedway Motorsports, Inc. (NYSE:TRK).
How have hedgies been trading Speedway Motorsports, Inc. (NYSE:TRK)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in TRK a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Speedway Motorsports, Inc. (NYSE:TRK), which was worth $6.8 million at the end of the fourth quarter. On the second spot was Potrero Capital Research which amassed $2.8 million worth of shares. Moreover, Marshall Wace LLP, Arrowstreet Capital, and GAMCO Investors were also bullish on Speedway Motorsports, Inc. (NYSE:TRK), allocating a large percentage of their portfolios to this stock.
Seeing as Speedway Motorsports, Inc. (NYSE:TRK) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of money managers who sold off their positions entirely heading into Q3. At the top of the heap, Thomas Bailard's Bailard Inc cut the largest investment of the 700 funds monitored by Insider Monkey, totaling about $0.2 million in stock, and Roger Ibbotson's Zebra Capital Management was right behind this move, as the fund cut about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Speedway Motorsports, Inc. (NYSE:TRK). These stocks are TrustCo Bank Corp NY (NASDAQ:TRST), Nanometrics Incorporated (NASDAQ:NANO), PetIQ, Inc. (NASDAQ:PETQ), and Thermon Group Holdings, Inc. (NYSE:THR). All of these stocks' market caps resemble TRK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRST,9,42743,1 NANO,19,99817,2 PETQ,13,54011,-9 THR,7,28568,-3 Average,12,56285,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $15 million in TRK's case. Nanometrics Incorporated (NASDAQ:NANO) is the most popular stock in this table. On the other hand Thermon Group Holdings, Inc. (NYSE:THR) is the least popular one with only 7 bullish hedge fund positions. Speedway Motorsports, Inc. (NYSE:TRK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TRK wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TRK investors were disappointed as the stock returned -15.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.