Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Transportadora de Gas del Sur SA (NYSE:TGS)? The smart money sentiment can provide an answer to this question.
Is Transportadora de Gas del Sur SA (NYSE:TGS) the right pick for your portfolio? The best stock pickers are reducing their bets on the stock. The number of bullish hedge fund positions were cut by 1 in recent months. Our calculations also showed that TGS isn't among the 30 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the recent hedge fund action encompassing Transportadora de Gas del Sur SA (NYSE:TGS).
What does the smart money think about Transportadora de Gas del Sur SA (NYSE:TGS)?
At Q4's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in TGS 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.
Among these funds, Point State Capital held the most valuable stake in Transportadora de Gas del Sur SA (NYSE:TGS), which was worth $22.4 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $7.5 million worth of shares. Moreover, Highland Capital Management, Millennium Management, and LMR Partners were also bullish on Transportadora de Gas del Sur SA (NYSE:TGS), allocating a large percentage of their portfolios to this stock.
Due to the fact that Transportadora de Gas del Sur SA (NYSE:TGS) has experienced falling interest from the smart money, it's safe to say that there is a sect of hedgies that elected to cut their full holdings last quarter. At the top of the heap, Jody LaNasa's Serengeti Asset Management sold off the largest position of all the hedgies watched by Insider Monkey, worth close to $2.9 million in stock. Sander Gerber's fund, Hudson Bay Capital Management, also cut its stock, about $1 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Transportadora de Gas del Sur SA (NYSE:TGS) but similarly valued. We will take a look at AmeriGas Partners, L.P. (NYSE:APU), TC Pipelines, LP (NYSE:TCP), TerraForm Power Inc (NASDAQ:TERP), and Tegna Inc (NYSE:TGNA). This group of stocks' market valuations resemble TGS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APU,4,18074,-2 TCP,2,4806,-2 TERP,8,192144,-6 TGNA,22,309181,-1 Average,9,131051,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $42 million in TGS's case. Tegna Inc (NYSE:TGNA) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 2 bullish hedge fund positions. Transportadora de Gas del Sur SA (NYSE:TGS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TGS wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TGS investors were disappointed as the stock returned -19.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.