At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Textainer Group Holdings Limited (NYSE:TGH) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Virtus Investment Partners Inc (NASDAQ:VRTS), Akebia Therapeutics Inc (NASDAQ:AKBA), and Peoples Utah Bancorp (NASDAQ:PUB) to gather more data points.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the recent hedge fund action encompassing Textainer Group Holdings Limited (NYSE:TGH).
What does the smart money think about Textainer Group Holdings Limited (NYSE:TGH)?
At Q4's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in TGH over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Rutabaga Capital Management was the largest shareholder of Textainer Group Holdings Limited (NYSE:TGH), with a stake worth $10.8 million reported as of the end of December. Trailing Rutabaga Capital Management was Royce & Associates, which amassed a stake valued at $8.2 million. Renaissance Technologies, Citadel Investment Group, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Textainer Group Holdings Limited (NYSE:TGH) has faced bearish sentiment from the smart money, we can see that there lies a certain "tier" of fund managers who sold off their positions entirely heading into Q3. Intriguingly, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital cut the biggest investment of the 700 funds tracked by Insider Monkey, valued at an estimated $0.5 million in call options, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Textainer Group Holdings Limited (NYSE:TGH). These stocks are Virtus Investment Partners Inc (NASDAQ:VRTS), Akebia Therapeutics Inc (NASDAQ:AKBA), Peoples Utah Bancorp (NASDAQ:PUB), and TPG Pace Holdings Corp. (NYSE:TPGH). This group of stocks' market valuations resemble TGH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRTS,11,73397,-2 AKBA,20,235207,1 PUB,3,15347,0 TPGH,17,190117,0 Average,12.75,128517,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $21 million in TGH's case. Akebia Therapeutics Inc (NASDAQ:AKBA) is the most popular stock in this table. On the other hand Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only 3 bullish hedge fund positions. Textainer Group Holdings Limited (NYSE:TGH) 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 TGH wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TGH investors were disappointed as the stock returned -1.9% 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.