Is Tennant Company (NYSE:TNC) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Tennant Company (NYSE:TNC) a buy, sell, or hold? Hedge funds are becoming less confident. The number of bullish hedge fund positions went down by 1 in recent months. Our calculations also showed that TNC isn't among the 30 most popular stocks among hedge funds. TNC was in 10 hedge funds' portfolios at the end of December. There were 11 hedge funds in our database with TNC positions at the end of the previous quarter.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's check out the latest hedge fund action regarding Tennant Company (NYSE:TNC).
How have hedgies been trading Tennant Company (NYSE:TNC)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in TNC a year ago. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Tennant Company (NYSE:TNC), which was worth $32.8 million at the end of the fourth quarter. On the second spot was GAMCO Investors which amassed $19.3 million worth of shares. Moreover, Millennium Management, Citadel Investment Group, and Arrowstreet Capital were also bullish on Tennant Company (NYSE:TNC), allocating a large percentage of their portfolios to this stock.
Due to the fact that Tennant Company (NYSE:TNC) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few hedgies that decided to sell off their entire stakes in the third quarter. It's worth mentioning that Joel Greenblatt's Gotham Asset Management sold off the biggest position of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $0.6 million in stock, and Roger Ibbotson's Zebra Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to Tennant Company (NYSE:TNC). We will take a look at InflaRx N.V. (NASDAQ:IFRX), Constellium NV (NYSE:CSTM), TrueCar, Inc. (NASDAQ:TRUE), and Chase Corporation (NYSEAMEX:CCF). All of these 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 IFRX,13,327409,-1 CSTM,32,234205,-3 TRUE,15,221328,-3 CCF,5,75172,-1 Average,16.25,214529,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $62 million in TNC's case. Constellium NV (NYSE:CSTM) is the most popular stock in this table. On the other hand Chase Corporation (NYSEAMEX:CCF) is the least popular one with only 5 bullish hedge fund positions. Tennant Company (NYSE:TNC) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on TNC as the stock returned 27.3% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.