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Here’s What Hedge Funds Think About Trupanion Inc (TRUP)

Reymerlyn Martin

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.

Trupanion Inc (NASDAQ:TRUP) investors should be aware of an increase in enthusiasm from smart money recently. TRUP was in 13 hedge funds' portfolios at the end of March. There were 10 hedge funds in our database with TRUP holdings at the end of the previous quarter. Our calculations also showed that TRUP isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Martin Raging Capital Management

Let's analyze the recent hedge fund action regarding Trupanion Inc (NASDAQ:TRUP).

How have hedgies been trading Trupanion Inc (NASDAQ:TRUP)?

At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in TRUP a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

TRUP_jun2019

More specifically, Nine Ten Partners was the largest shareholder of Trupanion Inc (NASDAQ:TRUP), with a stake worth $98.9 million reported as of the end of March. Trailing Nine Ten Partners was Greenlea Lane Capital, which amassed a stake valued at $19.6 million. StackLine Partners, Royce & Associates, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers have jumped into Trupanion Inc (NASDAQ:TRUP) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most outsized call position in Trupanion Inc (NASDAQ:TRUP). PEAK6 Capital Management had $2.5 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $0.4 million investment in the stock during the quarter. The other funds with brand new TRUP positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Frank Slattery's Symmetry Peak Management, and William C. Martin's Raging Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Trupanion Inc (NASDAQ:TRUP) but similarly valued. These stocks are Southside Bancshares, Inc. (NASDAQ:SBSI), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Loral Space & Communications Ltd. (NASDAQ:LORL), and Herc Holdings Inc. (NYSE:HRI). All of these stocks' market caps match TRUP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBSI,7,65153,1 SASR,14,80840,1 LORL,19,544117,1 HRI,28,485007,1 Average,17,293779,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $155 million in TRUP's case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 7 bullish hedge fund positions. Trupanion Inc (NASDAQ:TRUP) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on TRUP as the stock returned 9% during the same time frame and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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