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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Timkensteel Corp (NYSE:TMST) makes for a good investment right now.
Is TMST a good stock to buy now? Hedge fund interest in Timkensteel Corp (NYSE:TMST) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TMST 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). At the end of this article we will also compare TMST to other stocks including Electrameccanica Vehicles Corp. (NASDAQ:SOLO), Weyco Group, Inc. (NASDAQ:WEYS), and Aptinyx Inc. (NASDAQ:APTX) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
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. With all of this in mind we're going to take a peek at the key hedge fund action regarding Timkensteel Corp (NYSE:TMST).
Do Hedge Funds Think TMST Is A Good Stock To Buy Now?
At third quarter's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in TMST a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Timkensteel Corp (NYSE:TMST), which was worth $3.2 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $2 million worth of shares. AQR Capital Management, Renaissance Technologies, and Arrowstreet Capital 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 GAMCO Investors allocated the biggest weight to Timkensteel Corp (NYSE:TMST), around 0.02% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to TMST.
Because Timkensteel Corp (NYSE:TMST) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there were a few hedgies who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Murray Stahl's Horizon Asset Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, valued at an estimated $0.2 million in stock, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors was right behind this move, as the fund cut about $0 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Timkensteel Corp (NYSE:TMST). We will take a look at Electrameccanica Vehicles Corp. (NASDAQ:SOLO), Weyco Group, Inc. (NASDAQ:WEYS), Aptinyx Inc. (NASDAQ:APTX), Premier Financial Bancorp, Inc. (NASDAQ:PFBI), CTI Biopharma Corp. (NASDAQ:CTIC), Montage Resources Corp (NYSE:MR), and Lakeland Industries, Inc. (NASDAQ:LAKE). All of these stocks' market caps are similar to TMST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SOLO,3,1006,0 WEYS,3,3042,-1 APTX,7,36093,-1 PFBI,4,3181,2 CTIC,6,48701,-3 MR,14,15153,3 LAKE,12,29681,-2 Average,7,19551,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $9 million in TMST's case. Montage Resources Corp (NYSE:MR) is the most popular stock in this table. On the other hand Electrameccanica Vehicles Corp. (NASDAQ:SOLO) is the least popular one with only 3 bullish hedge fund positions. Timkensteel Corp (NYSE:TMST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TMST is 64.9. 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. Hedge funds were also right about betting on TMST as the stock returned 56.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.