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Is Thomson Reuters Corporation (TRI) Going to Burn These Hedge Funds?

Abigail Fisher

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Thomson Reuters Corporation (NYSE:TRI) investors should pay attention to an increase in enthusiasm from smart money lately. TRI was in 19 hedge funds' portfolios at the end of September. There were 17 hedge funds in our database with TRI holdings at the end of the previous quarter. Our calculations also showed that TRI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_670485" align="aligncenter" width="473"] Michael Platt of BlueCrest Capital Mgmt.[/caption]

Michael Platt BlueCrest Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the new hedge fund action regarding Thomson Reuters Corporation (NYSE:TRI).

Hedge fund activity in Thomson Reuters Corporation (NYSE:TRI)

Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the second quarter of 2019. By comparison, 24 hedge funds held shares or bullish call options in TRI a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Thomson Reuters Corporation (NYSE:TRI) was held by Arrowstreet Capital, which reported holding $81.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $67.8 million position. Other investors bullish on the company included Millennium Management, Samlyn Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Strycker View Capital allocated the biggest weight to Thomson Reuters Corporation (NYSE:TRI), around 9.81% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, earmarking 3.23 percent of its 13F equity portfolio to TRI.

Now, specific money managers were leading the bulls' herd. Hudson Bay Capital Management, managed by Sander Gerber, established the largest position in Thomson Reuters Corporation (NYSE:TRI). Hudson Bay Capital Management had $4 million invested in the company at the end of the quarter. Michael Platt and William Reeves's BlueCrest Capital Mgmt. also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Tewksbury's Stevens Capital Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Thomson Reuters Corporation (NYSE:TRI) but similarly valued. These stocks are Lam Research Corporation (NASDAQ:LRCX), General Mills, Inc. (NYSE:GIS), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and eBay Inc (NASDAQ:EBAY). This group of stocks' market caps match TRI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LRCX,47,2130443,12 GIS,35,916081,-4 CTSH,40,2368649,7 EBAY,53,3488246,6 Average,43.75,2225855,5.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.75 hedge funds with bullish positions and the average amount invested in these stocks was $2226 million. That figure was $361 million in TRI's case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand General Mills, Inc. (NYSE:GIS) is the least popular one with only 35 bullish hedge fund positions. Compared to these stocks Thomson Reuters Corporation (NYSE:TRI) is even less popular than GIS. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on TRI, though not to the same extent, as the stock returned 6% during the fourth quarter (through 11/30) and outperformed the market as well.

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

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