We are still in an overall bull market and many stocks that smart money investors were piling into 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. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like TPG RE Finance Trust, Inc. (NYSE:TRTX).
TPG RE Finance Trust, Inc. (NYSE:TRTX) was in 10 hedge funds' portfolios at the end of the third quarter of 2019. TRTX investors should pay attention to an increase in enthusiasm from smart money recently. There were 9 hedge funds in our database with TRTX positions at the end of the previous quarter. Our calculations also showed that TRTX 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.
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Cliff Asness of AQR Capital Management[/caption]
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 analyze the key hedge fund action surrounding TPG RE Finance Trust, Inc. (NYSE:TRTX).
How are hedge funds trading TPG RE Finance Trust, Inc. (NYSE:TRTX)?
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in TRTX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of TPG RE Finance Trust, Inc. (NYSE:TRTX), with a stake worth $18.1 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $7.9 million. Winton Capital Management, D E Shaw, and Two Sigma Advisors 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 Zebra Capital Management allocated the biggest weight to TPG RE Finance Trust, Inc. (NYSE:TRTX), around 0.33% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.28 percent of its 13F equity portfolio to TRTX.
Now, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the most valuable call position in TPG RE Finance Trust, Inc. (NYSE:TRTX). Citadel Investment Group had $1.8 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new TRTX investors: Cliff Asness's AQR Capital Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as TPG RE Finance Trust, Inc. (NYSE:TRTX) but similarly valued. We will take a look at Tootsie Roll Industries, Inc. (NYSE:TR), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Upwork Inc. (NASDAQ:UPWK), and Eventbrite, Inc. (NYSE:EB). This group of stocks' market values match TRTX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TR,17,92174,4 CORE,18,50919,-6 UPWK,19,122995,9 EB,23,267307,2 Average,19.25,133349,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $46 million in TRTX's case. Eventbrite, Inc. (NYSE:EB) is the most popular stock in this table. On the other hand Tootsie Roll Industries, Inc. (NYSE:TR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks TPG RE Finance Trust, Inc. (NYSE:TRTX) is even less popular than TR. Hedge funds dodged a bullet by taking a bearish stance towards TRTX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TRTX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TRTX investors were disappointed as the stock returned 2.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.