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Is TRMB A Good Stock To Buy According To Hedge Funds?

Asma UL Husna
·6 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Trimble Inc. (NASDAQ:TRMB).

Is TRMB a good stock to buy? Trimble Inc. (NASDAQ:TRMB) has experienced an increase in support from the world's most elite money managers lately. Trimble Inc. (NASDAQ:TRMB) was in 35 hedge funds' portfolios at the end of September. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 26 hedge funds in our database with TRMB holdings at the end of June. Our calculations also showed that TRMB 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we're going to take a glance at the recent hedge fund action regarding Trimble Inc. (NASDAQ:TRMB).

Do Hedge Funds Think TRMB Is A Good Stock To Buy Now?

At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TRMB over the last 21 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Trimble Inc. (NASDAQ:TRMB) was held by Generation Investment Management, which reported holding $448.5 million worth of stock at the end of September. It was followed by Impax Asset Management with a $376.7 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Trimble Inc. (NASDAQ:TRMB), around 3.3% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, earmarking 2.38 percent of its 13F equity portfolio to TRMB.

As one would reasonably expect, key hedge funds have been driving this bullishness. Columbus Circle Investors, managed by Principal Global Investors, assembled the most outsized position in Trimble Inc. (NASDAQ:TRMB). Columbus Circle Investors had $11.5 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $2 million investment in the stock during the quarter. The following funds were also among the new TRMB investors: Peter Muller's PDT Partners, Jinghua Yan's TwinBeech Capital, and Benjamin A. Smith's Laurion Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Trimble Inc. (NASDAQ:TRMB) but similarly valued. These stocks are Generac Holdings Inc. (NYSE:GNRC), Ceridian HCM Holding Inc. (NYSE:CDAY), Waters Corporation (NYSE:WAT), Jacobs Engineering Group Inc. (NYSE:J), Hewlett Packard Enterprise Company (NYSE:HPE), The AES Corporation (NYSE:AES), and Fortune Brands Home & Security Inc (NYSE:FBHS). All of these stocks' market caps match TRMB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GNRC,43,733948,7 CDAY,36,1809089,6 WAT,32,927887,-6 J,27,920744,-5 HPE,34,726468,3 AES,32,579345,1 FBHS,33,298974,-1 Average,33.9,856636,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $857 million. That figure was $1030 million in TRMB's case. Generac Holdings Inc. (NYSE:GNRC) is the most popular stock in this table. On the other hand Jacobs Engineering Group Inc. (NYSE:J) is the least popular one with only 27 bullish hedge fund positions. Trimble Inc. (NASDAQ:TRMB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRMB is 65. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on TRMB as the stock returned 35.8% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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