How Smart Money Has Been Trading Terreno Realty Corporation (TRNO)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Terreno Realty Corporation (NYSE:TRNO).

Terreno Realty Corporation (NYSE:TRNO) has seen no change in enthusiasm from smart money of late. TRNO was in 9 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PHH Corporation (NYSE:PHH), SkyWest, Inc. (NASDAQ:SKYW), and Badger Meter, Inc. (NYSE:BMI) to gather more data points.

Today there are numerous tools investors use to appraise publicly traded companies. A pair of the best tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top fund managers can trounce their index-focused peers by a very impressive margin (see the details here).

Now, let’s take a look at the fresh action encompassing Terreno Realty Corporation (NYSE:TRNO).

What does the smart money think about Terreno Realty Corporation (NYSE:TRNO)?

Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management has the largest position in Terreno Realty Corporation (NYSE:TRNO), worth close to $8.9 million, amounting to less than 0.1%% of its total 13F portfolio. The second-largest stake is held by D E Shaw, worth $2.7 million; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions encompass Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Martin Whitman’s Third Avenue Management.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PDT Partners).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Terreno Realty Corporation (NYSE:TRNO) but similarly valued. These stocks are PHH Corporation (NYSE:PHH), SkyWest, Inc. (NASDAQ:SKYW), Badger Meter, Inc. (NYSE:BMI), and Irsa Inversiones y Rprsntcins SA (ADR) (NYSE:IRS). This group of stocks’ market caps resemble TRNO’s market cap.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $121 million, compared to $16 million in TRNO’s case. PHH Corporation (NYSE:PHH) is the most popular stock in this table, while Badger Meter, Inc. (NYSE:BMI) is the least popular one with only 5 bullish hedge fund positions. Terreno Realty Corporation (NYSE:TRNO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PHH might be a better candidate to consider a long position.