Was The Smart Money Right About TransUnion (TRU)?
In this article you are going to find out whether hedge funds think TransUnion (NYSE:TRU) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is TransUnion (NYSE:TRU) a buy here? The smart money was cutting their exposure. The number of bullish hedge fund positions fell by 6 in recent months. TransUnion (NYSE:TRU) was in 41 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 47. Our calculations also showed that TRU isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 47 hedge funds in our database with TRU holdings at the end of September.
In the financial world there are many metrics stock market investors have at their disposal to appraise stocks. Some of the less utilized metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outpace the broader indices by a superb margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
Paul Marshall of Marshall Wace
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Do Hedge Funds Think TRU Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in TRU over the last 22 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in TransUnion (NYSE:TRU). Select Equity Group has a $355.6 million position in the stock, comprising 1.5% of its 13F portfolio. The second largest stake is held by Tim Hurd and Ed Magnus of BlueSpruce Investments, with a $267.5 million position; the fund has 5.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Paul Marshall and Ian Wace's Marshall Wace LLP, Andrew Immerman and Jeremy Schiffman's Palestra Capital Management and Farallon Capital. In terms of the portfolio weights assigned to each position Lansing Management allocated the biggest weight to TransUnion (NYSE:TRU), around 15.66% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, designating 5.27 percent of its 13F equity portfolio to TRU.
Judging by the fact that TransUnion (NYSE:TRU) has experienced a decline in interest from hedge fund managers, we can see that there exists a select few money managers who were dropping their entire stakes heading into Q1. At the top of the heap, Renaissance Technologies said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, comprising about $25.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $23.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 6 funds heading into Q1.
Let's go over hedge fund activity in other stocks similar to TransUnion (NYSE:TRU). We will take a look at CDW Corporation (NASDAQ:CDW), ZoomInfo Technologies Inc. (NASDAQ:ZI), Wheaton Precious Metals Corp. (NYSE:WPM), Expedia Group Inc (NASDAQ:EXPE), Pioneer Natural Resources Company (NYSE:PXD), Hologic, Inc. (NASDAQ:HOLX), and PagSeguro Digital Ltd. (NYSE:PAGS). This group of stocks' market caps are closest to TRU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDW,43,1622545,13 ZI,31,327082,9 WPM,34,755047,5 EXPE,76,6594558,12 PXD,40,685798,-2 HOLX,43,715967,-7 PAGS,25,1840597,1 Average,41.7,1791656,4.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.7 hedge funds with bullish positions and the average amount invested in these stocks was $1792 million. That figure was $2025 million in TRU's case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand PagSeguro Digital Ltd. (NYSE:PAGS) is the least popular one with only 25 bullish hedge fund positions. TransUnion (NYSE:TRU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TRU is 40.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately TRU wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TRU investors were disappointed as the stock returned 5.5% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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