Is Trimble Inc. (NASDAQ:TRMB) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Trimble Inc. (NASDAQ:TRMB) investors should pay attention to an increase in enthusiasm from smart money recently. Our calculations also showed that TRMB isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the latest hedge fund action encompassing Trimble Inc. (NASDAQ:TRMB).
How are hedge funds trading Trimble Inc. (NASDAQ:TRMB)?
At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TRMB over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Trimble Inc. (NASDAQ:TRMB) was held by Select Equity Group, which reported holding $270.3 million worth of stock at the end of March. It was followed by Impax Asset Management with a $265.8 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and PDT Partners.
As aggregate interest increased, key money managers have jumped into Trimble Inc. (NASDAQ:TRMB) headfirst. Ecofin Ltd, managed by Bernard Lambilliotte, created the largest position in Trimble Inc. (NASDAQ:TRMB). Ecofin Ltd had $1.2 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Joel Greenblatt's Gotham Asset Management and Claes Fornell's CSat Investment Advisory.
Let's also examine hedge fund activity in other stocks similar to Trimble Inc. (NASDAQ:TRMB). We will take a look at Arconic Inc. (NYSE:ARNC), Jacobs Engineering Group Inc (NYSE:JEC), Advance Auto Parts, Inc. (NYSE:AAP), and Devon Energy Corporation (NYSE:DVN). All of these stocks' market caps are closest to TRMB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARNC,42,3395555,8 JEC,32,1045023,-1 AAP,37,1458234,-10 DVN,36,1412120,-4 Average,36.75,1827733,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $1828 million. That figure was $688 million in TRMB's case. Arconic Inc. (NYSE:ARNC) is the most popular stock in this table. On the other hand Jacobs Engineering Group Inc (NYSE:JEC) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Trimble Inc. (NASDAQ:TRMB) is even less popular than JEC. Hedge funds dodged a bullet by taking a bearish stance towards TRMB. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TRMB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TRMB investors were disappointed as the stock returned -14% during the third quarter 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 in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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