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Is TFII A Good Stock To Buy Now?

Debasis Saha
·6 min read

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards TFI International Inc. (NYSE:TFII).

Is TFII a good stock to buy now? Investors who are in the know were in a bullish mood. The number of long hedge fund bets rose by 3 in recent months. TFI International Inc. (NYSE:TFII) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 12. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TFII isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Siegel of Two Sigma Advisors
David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to analyze the new hedge fund action surrounding TFI International Inc. (NYSE:TFII).

Do Hedge Funds Think TFII Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TFII over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TFII A Good Stock To Buy?
Is TFII A Good Stock To Buy?

The largest stake in TFI International Inc. (NYSE:TFII) was held by Renaissance Technologies, which reported holding $28.2 million worth of stock at the end of September. It was followed by GLG Partners with a $15.8 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to TFI International Inc. (NYSE:TFII), around 0.25% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to TFII.

As one would reasonably expect, key hedge funds have been driving this bullishness. D E Shaw, managed by D. E. Shaw, initiated the largest position in TFI International Inc. (NYSE:TFII). D E Shaw had $8 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also initiated a $6.6 million position during the quarter. The following funds were also among the new TFII investors: Brad Dunkley and Blair Levinsky's Waratah Capital Advisors and Donald Sussman's Paloma Partners.

Let's now take a look at hedge fund activity in other stocks similar to TFI International Inc. (NYSE:TFII). We will take a look at Gildan Activewear Inc (NYSE:GIL), CAE, Inc. (NYSE:CAE), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), FTI Consulting, Inc. (NYSE:FCN), Curtiss-Wright Corp. (NYSE:CW), QTS Realty Trust Inc (NYSE:QTS), and Shift4 Payments, Inc. (NYSE:FOUR). This group of stocks' market values are similar to TFII's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GIL,18,522441,-4 CAE,12,88171,-2 BHVN,33,751815,-9 FCN,37,388149,5 CW,26,229569,0 QTS,25,454581,-4 FOUR,32,243072,17 Average,26.1,382543,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $383 million. That figure was $117 million in TFII's case. FTI Consulting, Inc. (NYSE:FCN) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 12 bullish hedge fund positions. TFI International Inc. (NYSE:TFII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TFII is 40. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TFII as the stock returned 25.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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

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