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Is TRC A Good Stock To Buy Now?

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Abigail Fisher
·6 min read
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In this article we will take a look at whether hedge funds think Tejon Ranch Company (NYSE:TRC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is TRC a good stock to buy now? Tejon Ranch Company (NYSE:TRC) investors should be aware of an increase in support from the world's most elite money managers recently. Tejon Ranch Company (NYSE:TRC) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 14. There were 11 hedge funds in our database with TRC holdings at the end of June. Our calculations also showed that TRC 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).

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.

John Rogers Ariel Investments
John Rogers Ariel Investments

John Rogers of Ariel Investments

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 let's take a look at the key hedge fund action encompassing Tejon Ranch Company (NYSE:TRC).

Do Hedge Funds Think TRC Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TRC over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Tejon Ranch Company (NYSE:TRC). Royce & Associates has a $18.5 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $11.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Mario Gabelli's GAMCO Investors, Michael Price's MFP Investors and John W. Rogers's Ariel Investments. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Tejon Ranch Company (NYSE:TRC), around 1.18% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to TRC.

Now, some big names were leading the bulls' herd. AQR Capital Management, managed by Cliff Asness, assembled the most outsized position in Tejon Ranch Company (NYSE:TRC). AQR Capital Management had $0.4 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also initiated a $0.3 million position during the quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Tejon Ranch Company (NYSE:TRC) but similarly valued. We will take a look at Vermilion Energy Inc (NYSE:VET), Lawson Products, Inc. (NASDAQ:LAWS), Corvus Gold Inc. (NASDAQ:KOR), Amerant Bancorp Inc. (NASDAQ:AMTB), MTS Systems Corporation (NASDAQ:MTSC), Cambridge Bancorp (NASDAQ:CATC), and RedHill Biopharma Ltd (NASDAQ:RDHL). This group of stocks' market valuations are closest to TRC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VET,6,8820,-2 LAWS,5,26245,-2 KOR,4,177014,4 AMTB,2,3076,0 MTSC,14,24625,-1 CATC,5,13789,-2 RDHL,3,1617,1 Average,5.6,36455,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $52 million in TRC's case. MTS Systems Corporation (NASDAQ:MTSC) is the most popular stock in this table. On the other hand Amerant Bancorp Inc. (NASDAQ:AMTB) is the least popular one with only 2 bullish hedge fund positions. Tejon Ranch Company (NYSE:TRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRC is 80.7. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 16.2 percentage points. Unfortunately TRC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TRC were disappointed as the stock returned 5.6% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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