World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Trimble Inc. (NASDAQ:TRMB) was in 14 hedge funds' portfolios at the end of March. TRMB shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 17 hedge funds in our database with TRMB positions at the end of the previous quarter. Our calculations also showed that TRMB 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's analyze the new hedge fund action regarding Trimble Inc. (NASDAQ:TRMB).
How are hedge funds trading Trimble Inc. (NASDAQ:TRMB)?
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TRMB over the last 15 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Impax Asset Management held the most valuable stake in Trimble Inc. (NASDAQ:TRMB), which was worth $246 million at the end of the first quarter. On the second spot was Select Equity Group which amassed $192.1 million worth of shares. Moreover, D E Shaw, PDT Partners, and Millennium Management were also bullish on Trimble Inc. (NASDAQ:TRMB), allocating a large percentage of their portfolios to this stock.
Because Trimble Inc. (NASDAQ:TRMB) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of fund managers who sold off their full holdings in the third quarter. At the top of the heap, Jim Simons's Renaissance Technologies sold off the biggest position of the "upper crust" of funds watched by Insider Monkey, totaling close to $4.2 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund said goodbye to about $2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Trimble Inc. (NASDAQ:TRMB) but similarly valued. We will take a look at Shaw Communications Inc (NYSE:SJR), Iron Mountain Incorporated (NYSE:IRM), Sociedad Química y Minera de Chile S.A. (NYSE:SQM), and FMC Corporation (NYSE:FMC). This group of stocks' market values are similar to TRMB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SJR,12,275762,-2 IRM,18,149930,7 SQM,9,41684,1 FMC,29,1271678,-3 Average,17,434764,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $435 million. That figure was $573 million in TRMB's case. FMC Corporation (NYSE:FMC) is the most popular stock in this table. On the other hand Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is the least popular one with only 9 bullish hedge fund positions. Trimble Inc. (NASDAQ:TRMB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on TRMB as the stock returned 8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.