Should You Avoid Trueblue Inc (TBI)?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Trueblue Inc (NYSE:TBI) , and what that likely means for the prospects of the company and its stock.

Trueblue Inc (NYSE:TBI) shareholders have witnessed a decrease in support from the world’s most successful money managers recently. TBI was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 15 hedge funds in our database with TBI positions at the end of the previous quarter. 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 Kronos Worldwide, Inc. (NYSE:KRO), Team, Inc. (NYSE:TISI), and Unit Corporation (NYSE:UNT) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, we’re going to take a glance at the key action regarding Trueblue Inc (NYSE:TBI).

How are hedge funds trading Trueblue Inc (NYSE:TBI)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in TBI over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the largest position in Trueblue Inc (NYSE:TBI). Royce & Associates has a $52.3 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Thomas E. Claugus of GMT Capital, with a $39.6 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise Cliff Asness’s AQR Capital Management, Joel Greenblatt’s Gotham Asset Management and D E Shaw, one of the biggest hedge funds in the world. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as Trueblue Inc (NYSE:TBI) has weathered declining sentiment from hedge fund managers, it’s safe to say that there is a sect of funds that slashed their positions entirely heading into Q4. It’s worth mentioning that Neil Chriss’s Hutchin Hill Capital cashed in the largest position of the 700 funds followed by Insider Monkey, comprising close to $0.9 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund sold off about $0.4 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trueblue Inc (NYSE:TBI) but similarly valued. We will take a look at Kronos Worldwide, Inc. (NYSE:KRO), Team, Inc. (NYSE:TISI), Unit Corporation (NYSE:UNT), and Navigant Consulting, Inc. (NYSE:NCI). All of these stocks’ market caps match TBI’s market cap.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $120 million in TBI’s case. Unit Corporation (NYSE:UNT) is the most popular stock in this table. On the other hand Kronos Worldwide, Inc. (NYSE:KRO) is the least popular one with only 8 bullish hedge fund positions. Trueblue Inc (NYSE:TBI) 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 UNT might be a better candidate to consider taking a long position in.