Trinity Biotech plc (NASDAQ:TRIB): Are Hedge Funds Right About This Stock?
How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Trinity Biotech plc (NASDAQ:TRIB).
Hedge fund interest in Trinity Biotech plc (NASDAQ:TRIB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article, we will also compare TRIB to other stocks including Estre Ambiental, Inc. (NASDAQ:ESTR), Ossen Innovation Co Ltd (NASDAQ:OSN), and Clearside Biomedical, Inc. (NASDAQ:CLSD) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27676" align="alignnone" width="355"]
Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to analyze the fresh hedge fund action encompassing Trinity Biotech plc (NASDAQ:TRIB).
Hedge fund activity in Trinity Biotech plc (NASDAQ:TRIB)
At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in TRIB a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Bradley Louis Radoff's Fondren Management has the largest position in Trinity Biotech plc (NASDAQ:TRIB), worth close to $0.9 million, comprising 0.7% of its total 13F portfolio. The second most bullish fund manager is Jim Simons (founder) of Renaissance Technologies, with a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions comprise Israel Englander's Millennium Management, John Overdeck, and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position, Fondren Management allocated the biggest weight to Trinity Biotech plc (NASDAQ:TRIB), around 0.72% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0007 percent of its 13F equity portfolio to TRIB.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Trinity Biotech plc (NASDAQ:TRIB). These stocks are Estre Ambiental, Inc. (NASDAQ:ESTR), Ossen Innovation Co Ltd (NASDAQ:OSN), Clearside Biomedical, Inc. (NASDAQ:CLSD), and Fuel Tech Inc. (NASDAQ:FTEK). This group of stocks' market caps match TRIB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESTR,6,876,0 OSN,1,152,0 CLSD,2,191,-2 FTEK,2,1133,0 Average,2.75,588,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in TRIB's case. Estre Ambiental, Inc. (NASDAQ:ESTR) is the most popular stock in this table. On the other hand, Ossen Innovation Co Ltd (NASDAQ:OSN) is the least popular one with only 1 bullish hedge fund positions. Trinity Biotech plc (NASDAQ:TRIB) is not the most popular stock in this group but hedge fund interest is still above average. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, TRIB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TRIB were disappointed as the stock returned -16.5% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.