We can judge whether Tenaris S.A. (NYSE:TS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Tenaris S.A. (NYSE:TS) an outstanding stock to buy now? Investors who are in the know are becoming more confident. The number of long hedge fund bets rose by 1 recently. Our calculations also showed that TS isn't among the 30 most popular stocks among hedge funds. TS was in 16 hedge funds' portfolios at the end of June. There were 15 hedge funds in our database with TS 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 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 some fund managers who are betting on Dow reaching 40000 in a year, 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 take a look at the recent hedge fund action encompassing Tenaris S.A. (NYSE:TS).
Hedge fund activity in Tenaris S.A. (NYSE:TS)
Heading into the third quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TS over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tenaris S.A. (NYSE:TS) was held by Egerton Capital Limited, which reported holding $373.9 million worth of stock at the end of March. It was followed by Millennium Management with a $64 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Balyasny Asset Management.
Consequently, specific money managers were breaking ground themselves. Carlson Capital, managed by Clint Carlson, established the largest position in Tenaris S.A. (NYSE:TS). Carlson Capital had $4.5 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $4.1 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management and Mike Vranos's Ellington.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Tenaris S.A. (NYSE:TS) but similarly valued. These stocks are International Flavors & Fragrances Inc (NYSE:IFF), Broadridge Financial Solutions, Inc. (NYSE:BR), Garmin Ltd. (NASDAQ:GRMN), and Arch Capital Group Ltd. (NASDAQ:ACGL). All of these stocks' market caps are similar to TS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IFF,18,222801,2 BR,21,254023,-5 GRMN,32,456384,5 ACGL,23,1291283,11 Average,23.5,556123,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $657 million in TS's case. Garmin Ltd. (NASDAQ:GRMN) is the most popular stock in this table. On the other hand International Flavors & Fragrances Inc (NYSE:IFF) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Tenaris S.A. (NYSE:TS) is even less popular than IFF. Hedge funds dodged a bullet by taking a bearish stance towards TS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TS investors were disappointed as the stock returned -19.5% 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.