The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Tenaris S.A. (NYSE:TS) based on those filings.
Is Tenaris S.A. (NYSE:TS) the right pick for your portfolio? Prominent investors are becoming less confident. The number of long hedge fund bets went down by 1 in recent months. Our calculations also showed that TS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TS was in 15 hedge funds' portfolios at the end of March. There were 16 hedge funds in our database with TS positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_728376" align="aligncenter" width="399"] Jonathan Barrett of Luminus Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a glance at the key hedge fund action encompassing Tenaris S.A. (NYSE:TS).
What does smart money think about Tenaris S.A. (NYSE:TS)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in TS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Tenaris S.A. (NYSE:TS), which was worth $105.5 million at the end of the third quarter. On the second spot was D E Shaw which amassed $25.7 million worth of shares. Citadel Investment Group, Luminus Management, and Alyeska Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Tenaris S.A. (NYSE:TS), around 2.07% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to TS.
Due to the fact that Tenaris S.A. (NYSE:TS) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there were a few funds that slashed their positions entirely in the first quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest stake of all the hedgies watched by Insider Monkey, comprising about $30.8 million in stock. Sara Nainzadeh's fund, Centenus Global Management, also sold off its stock, about $3.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Tenaris S.A. (NYSE:TS). We will take a look at Cloudflare, Inc. (NYSE:NET), CyrusOne Inc (NASDAQ:CONE), Service Corporation International (NYSE:SCI), and PTC Inc (NASDAQ:PTC). This group of stocks' market valuations resemble TS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NET,24,498974,2 CONE,31,317450,-1 SCI,30,398250,12 PTC,35,1181835,0 Average,30,599127,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $599 million. That figure was $213 million in TS's case. PTC Inc (NASDAQ:PTC) is the most popular stock in this table. On the other hand Cloudflare, Inc. (NYSE:NET) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Tenaris S.A. (NYSE:TS) is even less popular than NET. Hedge funds dodged a bullet by taking a bearish stance towards TS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately TS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TS investors were disappointed as the stock returned 15.6% during the second quarter (through June 25th) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.