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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Thomson Reuters Corporation (NYSE:TRI).
Is TRI a good stock to buy now? Thomson Reuters Corporation (NYSE:TRI) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 25. TRI investors should pay attention to a decrease in enthusiasm from smart money lately. There were 25 hedge funds in our database with TRI holdings at the end of June. Our calculations also showed that TRI 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.
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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Blair Levinsky of Waratah Capital Advisors
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 analyze the new hedge fund action surrounding Thomson Reuters Corporation (NYSE:TRI).
Do Hedge Funds Think TRI Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the second quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in TRI a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Echo Street Capital Management held the most valuable stake in Thomson Reuters Corporation (NYSE:TRI), which was worth $72.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $58.4 million worth of shares. Arrowstreet Capital, Millennium Management, and Balyasny Asset Management 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 Strycker View Capital allocated the biggest weight to Thomson Reuters Corporation (NYSE:TRI), around 3.97% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, earmarking 3.95 percent of its 13F equity portfolio to TRI.
Seeing as Thomson Reuters Corporation (NYSE:TRI) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management sold off the biggest stake of the 750 funds followed by Insider Monkey, comprising close to $2.7 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund dropped about $0.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Thomson Reuters Corporation (NYSE:TRI) but similarly valued. These stocks are TC Energy Corporation (NYSE:TRP), DexCom, Inc. (NASDAQ:DXCM), Emerson Electric Co. (NYSE:EMR), Public Storage (NYSE:PSA), Itau Unibanco Holding SA (NYSE:ITUB), Keurig Dr Pepper Inc. (NASDAQ:KDP), and Snap Inc. (NYSE:SNAP). This group of stocks' market values match TRI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRP,16,84405,-5 DXCM,58,1516977,3 EMR,36,467606,0 PSA,17,818499,-9 ITUB,16,236336,-4 KDP,41,1213638,12 SNAP,51,1166136,2 Average,33.6,786228,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.6 hedge funds with bullish positions and the average amount invested in these stocks was $786 million. That figure was $315 million in TRI's case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 16 bullish hedge fund positions. Thomson Reuters Corporation (NYSE:TRI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TRI is 25.4. 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 negative signal and 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately TRI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TRI investors were disappointed as the stock returned 1.3% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.