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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 Trinseo S.A. (NYSE:TSE).
Is TSE a good stock to buy now? Hedge funds were getting less optimistic. The number of bullish hedge fund bets retreated by 5 recently. Trinseo S.A. (NYSE:TSE) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. Our calculations also showed that TSE 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). There were 18 hedge funds in our database with TSE holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 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 stocks that are in our short portfolio.
Matthew Hulsizer of PEAK6 Capital
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 view the new hedge fund action encompassing Trinseo S.A. (NYSE:TSE).
Do Hedge Funds Think TSE Is A Good Stock To Buy Now?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from the second quarter of 2020. By comparison, 15 hedge funds held shares or bullish call options in TSE a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Trinseo S.A. (NYSE:TSE), with a stake worth $11.1 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $5.4 million. Quaker Capital Investments, Proxima Capital Management, and Two Sigma Advisors 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 Proxima Capital Management allocated the biggest weight to Trinseo S.A. (NYSE:TSE), around 13.29% of its 13F portfolio. Quaker Capital Investments is also relatively very bullish on the stock, dishing out 2.35 percent of its 13F equity portfolio to TSE.
Because Trinseo S.A. (NYSE:TSE) has witnessed bearish sentiment from the smart money, we can see that there were a few money managers that slashed their full holdings by the end of the third quarter. Interestingly, Steve Cohen's Point72 Asset Management said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $2 million in stock. Noam Gottesman's fund, GLG Partners, also sold off its stock, about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Trinseo S.A. (NYSE:TSE) but similarly valued. These stocks are Sally Beauty Holdings, Inc. (NYSE:SBH), Signet Jewelers Limited (NYSE:SIG), Kite Realty Group Trust (NYSE:KRG), Myriad Genetics, Inc. (NASDAQ:MYGN), Usa Compression Partners LP (NYSE:USAC), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), and Waddell & Reed Financial, Inc. (NYSE:WDR). This group of stocks' market valuations resemble TSE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBH,27,134912,1 SIG,22,379553,6 KRG,7,38413,-3 MYGN,19,190093,-2 USAC,4,6819,1 BTAI,11,75492,-2 WDR,21,116258,-4 Average,15.9,134506,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $32 million in TSE's case. Sally Beauty Holdings, Inc. (NYSE:SBH) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 4 bullish hedge fund positions. Trinseo S.A. (NYSE:TSE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSE is 30.7. 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. 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 still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TSE as the stock returned 74.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.