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In this article we will take a look at whether hedge funds think Transportadora de Gas del Sur SA (NYSE:TGS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Transportadora de Gas del Sur SA (NYSE:TGS) undervalued? The smart money was getting more bullish. The number of bullish hedge fund bets went up by 1 lately. Transportadora de Gas del Sur SA (NYSE:TGS) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that TGS 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Howard Marks of Oaktree 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. Keeping this in mind we're going to take a glance at the new hedge fund action regarding Transportadora de Gas del Sur SA (NYSE:TGS).
What have hedge funds been doing with Transportadora de Gas del Sur SA (NYSE:TGS)?
At the end of September, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in TGS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Oaktree Capital Management was the largest shareholder of Transportadora de Gas del Sur SA (NYSE:TGS), with a stake worth $8.3 million reported as of the end of September. Trailing Oaktree Capital Management was Arrowstreet Capital, which amassed a stake valued at $0.5 million. Millennium Management, Marshall Wace LLP, and D E Shaw 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 Oaktree Capital Management allocated the biggest weight to Transportadora de Gas del Sur SA (NYSE:TGS), around 0.18% of its 13F portfolio. Truvvo Partners is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to TGS.
Now, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the most valuable position in Transportadora de Gas del Sur SA (NYSE:TGS). Millennium Management had $0.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is D. E. Shaw's D E Shaw.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Transportadora de Gas del Sur SA (NYSE:TGS) but similarly valued. These stocks are Wabash National Corporation (NYSE:WNC), The Andersons, Inc. (NASDAQ:ANDE), Colony Credit Real Estate, Inc. (NYSE:CLNC), Neenah Inc. (NYSE:NP), Clearwater Paper Corp (NYSE:CLW), ImmunoGen, Inc. (NASDAQ:IMGN), and Betterware de Mexico, S.A.B. de C.V. (NASDAQ:BWMX). All of these stocks' market caps match TGS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WNC,18,58904,3 ANDE,15,25045,4 CLNC,10,37346,4 NP,11,21432,-2 CLW,13,50476,-1 IMGN,18,129732,-2 BWMX,2,4322,0 Average,12.4,46751,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $10 million in TGS's case. Wabash National Corporation (NYSE:WNC) is the most popular stock in this table. On the other hand Betterware de Mexico, S.A.B. de C.V. (NASDAQ:BWMX) is the least popular one with only 2 bullish hedge fund positions. Transportadora de Gas del Sur SA (NYSE:TGS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TGS is 33.5. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on TGS as the stock returned 32.5% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.