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Were Hedge Funds Right About Trusting TrustCo Bank Corp NY (TRST)?

Abigail Fisher

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Is TrustCo Bank Corp NY (NASDAQ:TRST) a buy here? Hedge funds are betting on the stock. The number of long hedge fund bets inched up by 2 in recent months. Our calculations also showed that TRST isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TRST_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 gander at the latest hedge fund action surrounding TrustCo Bank Corp NY (NASDAQ:TRST).

How are hedge funds trading TrustCo Bank Corp NY (NASDAQ:TRST)?

Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in TRST 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.

David Harding

Among these funds, Royce & Associates held the most valuable stake in TrustCo Bank Corp NY (NASDAQ:TRST), which was worth $21.4 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $13.1 million worth of shares. Moreover, Millennium Management, Arrowstreet Capital, and AQR Capital Management were also bullish on TrustCo Bank Corp NY (NASDAQ:TRST), allocating a large percentage of their portfolios to this stock.

Consequently, some big names have jumped into TrustCo Bank Corp NY (NASDAQ:TRST) headfirst. Citadel Investment Group, managed by Ken Griffin, created the largest position in TrustCo Bank Corp NY (NASDAQ:TRST). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $0.1 million investment in the stock during the quarter.

Let's go over hedge fund activity in other stocks similar to TrustCo Bank Corp NY (NASDAQ:TRST). These stocks are Mallinckrodt Public Limited Company (NYSE:MNK), Omega Flex, Inc. (NASDAQ:OFLX), Community Healthcare Trust Inc (NYSE:CHCT), and Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA). All of these stocks' market caps are closest to TRST's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MNK,20,152724,0 OFLX,3,9894,-1 CHCT,8,81504,-1 KNSA,9,77379,-1 Average,10,80375,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $47 million in TRST's case. Mallinckrodt Public Limited Company (NYSE:MNK) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 3 bullish hedge fund positions. TrustCo Bank Corp NY (NASDAQ:TRST) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on TRST, though not to the same extent, as the stock returned 3.8% during the third quarter and outperformed the market as well.

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

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