As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the second quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Triumph Group Inc (NYSE:TGI).
Triumph Group Inc (NYSE:TGI) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of the second quarter of 2019. 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 Opera Limited (NASDAQ:OPRA), Garrett Motion Inc. (NYSE:GTX), and Cryolife Inc (NYSE:CRY) to gather more data points. Our calculations also showed that TGI isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the new hedge fund action regarding Triumph Group Inc (NYSE:TGI).
How have hedgies been trading Triumph Group Inc (NYSE:TGI)?
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TGI over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies holds the biggest position in Triumph Group Inc (NYSE:TGI). Renaissance Technologies has a $26.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is D E Shaw, led by D. E. Shaw, holding a $13.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Chuck Royce's Royce & Associates, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management.
Because Triumph Group Inc (NYSE:TGI) has experienced falling interest from the smart money, we can see that there is a sect of money managers that slashed their positions entirely by the end of the second quarter. At the top of the heap, Louis Bacon's Moore Global Investments said goodbye to the largest investment of the 750 funds watched by Insider Monkey, valued at about $1 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Triumph Group Inc (NYSE:TGI). We will take a look at Opera Limited (NASDAQ:OPRA), Garrett Motion Inc. (NYSE:GTX), Cryolife Inc (NYSE:CRY), and Geopark Limited (NYSE:GPRK). All of these stocks' market caps are closest to TGI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OPRA,6,19440,1 GTX,23,290830,4 CRY,15,47793,2 GPRK,10,95513,-3 Average,13.5,113394,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $62 million in TGI's case. Garrett Motion Inc. (NYSE:GTX) is the most popular stock in this table. On the other hand Opera Limited (NASDAQ:OPRA) is the least popular one with only 6 bullish hedge fund positions. Triumph Group Inc (NYSE:TGI) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TGI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TGI investors were disappointed as the stock returned 0.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.