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Where Do Hedge Funds Stand On TransDigm Group Incorporated (TDG)?

·6 min read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of TransDigm Group Incorporated (NYSE:TDG) based on that data.

TransDigm Group Incorporated (NYSE:TDG) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months. TransDigm Group Incorporated (NYSE:TDG) was in 62 hedge funds' portfolios at the end of March. The all time high for this statistic is 64. There were 64 hedge funds in our database with TDG positions at the end of the fourth quarter. Our calculations also showed that TDG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chase Coleman of Tiger Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to check out the fresh hedge fund action regarding TransDigm Group Incorporated (NYSE:TDG).

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

At the end of March, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in TDG over the last 23 quarters. So, let's find out 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, Tiger Global Management LLC, managed by Chase Coleman, holds the largest position in TransDigm Group Incorporated (NYSE:TDG). Tiger Global Management LLC has a $1.0331 billion position in the stock, comprising 2.4% of its 13F portfolio. Sitting at the No. 2 spot is Stockbridge Partners, managed by Sharlyn C. Heslam, which holds a $913.9 million position; 22.3% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass David Goel and Paul Ferri's Matrix Capital Management, Mark Massey's AltaRock Partners and Snehal Amin's Windacre Partnership. In terms of the portfolio weights assigned to each position Anabranch Capital allocated the biggest weight to TransDigm Group Incorporated (NYSE:TDG), around 25.39% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, setting aside 22.26 percent of its 13F equity portfolio to TDG.

Since TransDigm Group Incorporated (NYSE:TDG) has experienced bearish sentiment from hedge fund managers, logic holds that there exists a select few funds that elected to cut their positions entirely last quarter. Interestingly, Robert Pitts's Steadfast Capital Management cut the largest stake of all the hedgies watched by Insider Monkey, totaling an estimated $151.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also cut its stock, about $133.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to TransDigm Group Incorporated (NYSE:TDG). These stocks are Brown-Forman Corporation (NYSE:BF), Suncor Energy Inc. (NYSE:SU), BeiGene, Ltd. (NASDAQ:BGNE), Archer Daniels Midland Company (NYSE:ADM), Motorola Solutions Inc (NYSE:MSI), Republic Services, Inc. (NYSE:RSG), and Companhia Paranaense de Energia - COPEL (NYSE:ELP). This group of stocks' market valuations are closest to TDG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BF,35,1477271,6 SU,33,1047702,8 BGNE,19,6242377,-2 ADM,34,696043,-1 MSI,29,1000522,-6 RSG,36,1073744,0 ELP,5,36122,-4 Average,27.3,1653397,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $1653 million. That figure was $6291 million in TDG's case. Republic Services, Inc. (NYSE:RSG) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia - COPEL (NYSE:ELP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks TransDigm Group Incorporated (NYSE:TDG) is more popular among hedge funds. Our overall hedge fund sentiment score for TDG is 82.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on TDG as the stock returned 12.6% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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