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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards TPG RE Finance Trust, Inc. (NYSE:TRTX).
Is TRTX a good stock to buy now? TPG RE Finance Trust, Inc. (NYSE:TRTX) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 17. TRTX has seen a decrease in enthusiasm from smart money recently. There were 14 hedge funds in our database with TRTX positions at the end of the second quarter. Our calculations also showed that TRTX 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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.
David Harding of Winton Capital Management
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. With all of this in mind let's take a look at the fresh hedge fund action encompassing TPG RE Finance Trust, Inc. (NYSE:TRTX).
Do Hedge Funds Think TRTX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TRTX over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, HG Vora Capital Management was the largest shareholder of TPG RE Finance Trust, Inc. (NYSE:TRTX), with a stake worth $40.2 million reported as of the end of September. Trailing HG Vora Capital Management was Arrowstreet Capital, which amassed a stake valued at $8.7 million. Brigade Capital, D E Shaw, and Winton Capital Management 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 HG Vora Capital Management allocated the biggest weight to TPG RE Finance Trust, Inc. (NYSE:TRTX), around 3.03% of its 13F portfolio. Ellington is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to TRTX.
Judging by the fact that TPG RE Finance Trust, Inc. (NYSE:TRTX) has faced bearish sentiment from the smart money, logic holds that there is a sect of hedgies that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management dropped the largest position of the 750 funds tracked by Insider Monkey, worth about $4.9 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 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 TPG RE Finance Trust, Inc. (NYSE:TRTX) but similarly valued. These stocks are Hibbett Sports, Inc. (NASDAQ:HIBB), Sculptor Capital Management, Inc. (NYSE:SCU), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), Frequency Therapeutics, Inc. (NASDAQ:FREQ), Crescent Point Energy Corp (NYSE:CPG), HighPeak Energy, Inc. (NASDAQ:HPK), and Kearny Financial Corp. (NASDAQ:KRNY). This group of stocks' market valuations are closest to TRTX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HIBB,21,181894,0 SCU,13,60894,3 AMEH,7,3533,4 FREQ,7,88452,1 CPG,11,23697,2 HPK,1,87,1 KRNY,18,75155,-3 Average,11.1,61959,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $74 million in TRTX's case. Hibbett Sports, Inc. (NASDAQ:HIBB) is the most popular stock in this table. On the other hand HighPeak Energy, Inc. (NASDAQ:HPK) is the least popular one with only 1 bullish hedge fund positions. TPG RE Finance Trust, Inc. (NYSE:TRTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRTX is 56.9. 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. Hedge funds were also right about betting on TRTX as the stock returned 28.8% since the end of Q3 (through 12/8) 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.