At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Team, Inc. (NYSE:TISI).
Is TISI a good stock to buy now? Investors who are in the know were getting more bullish. The number of long hedge fund positions improved by 3 lately. Team, Inc. (NYSE:TISI) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TISI 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). There were 12 hedge funds in our database with TISI positions at the end of the second quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 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 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 stocks that are in our short portfolio.
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 let's view the latest hedge fund action surrounding Team, Inc. (NYSE:TISI).
Do Hedge Funds Think TISI Is A Good Stock To Buy Now?
At third quarter's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TISI over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Engine Capital, managed by Arnaud Ajdler, holds the biggest position in Team, Inc. (NYSE:TISI). Engine Capital has a $14.9 million position in the stock, comprising 7.5% of its 13F portfolio. Coming in second is John W. Rogers of Ariel Investments, with a $10.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass Mario Gabelli's GAMCO Investors, Jeffrey Altman's Owl Creek Asset Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to Team, Inc. (NYSE:TISI), around 7.5% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to TISI.
As industrywide interest jumped, key money managers have been driving this bullishness. Owl Creek Asset Management, managed by Jeffrey Altman, created the most valuable position in Team, Inc. (NYSE:TISI). Owl Creek Asset Management had $2.5 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also initiated a $0.7 million position during the quarter. The other funds with brand new TISI positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Michael Gelband's ExodusPoint Capital, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks similar to Team, Inc. (NYSE:TISI). These stocks are Axcella Health Inc. (NASDAQ:AXLA), Howard Bancorp Inc (NASDAQ:HBMD), Iteris Inc (NASDAQ:ITI), Centennial Resource Development, Inc. (NASDAQ:CDEV), KVH Industries, Inc. (NASDAQ:KVHI), Tiptree Inc. (NASDAQ:TIPT), and Oil States International, Inc. (NYSE:OIS). This group of stocks' market valuations match TISI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXLA,3,672,-2 HBMD,4,11065,-1 ITI,11,19098,-2 CDEV,14,20635,-6 KVHI,4,4825,0 TIPT,3,842,1 OIS,12,10351,-1 Average,7.3,9641,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $46 million in TISI's case. Centennial Resource Development, Inc. (NASDAQ:CDEV) is the most popular stock in this table. On the other hand Axcella Health Inc. (NASDAQ:AXLA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Team, Inc. (NYSE:TISI) is more popular among hedge funds. Our overall hedge fund sentiment score for TISI is 88. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on TISI as the stock returned 81.1% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.