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Did Hedge Funds Drop The Ball On Teekay Tankers Ltd. (TNK) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Teekay Tankers Ltd. (NYSE:TNK) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Teekay Tankers Ltd. (NYSE:TNK) has seen an increase in enthusiasm from smart money recently. Our calculations also showed that TNK isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a peek at the key hedge fund action surrounding Teekay Tankers Ltd. (NYSE:TNK).

How are hedge funds trading Teekay Tankers Ltd. (NYSE:TNK)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TNK over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TNK A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Teekay Tankers Ltd. (NYSE:TNK), with a stake worth $25.9 million reported as of the end of September. Trailing Renaissance Technologies was Marshall Wace LLP, which amassed a stake valued at $7 million. GLG Partners, Cobalt Capital Management, and Citadel Investment Group 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 Cobalt Capital Management allocated the biggest weight to Teekay Tankers Ltd. (NYSE:TNK), around 2.31% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, designating 1.17 percent of its 13F equity portfolio to TNK.

With a general bullishness amongst the heavyweights, key money managers have jumped into Teekay Tankers Ltd. (NYSE:TNK) headfirst. MIK Capital, managed by Kamyar Khajavi, created the most outsized position in Teekay Tankers Ltd. (NYSE:TNK). MIK Capital had $2.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.6 million position during the quarter. The other funds with brand new TNK positions are Frederick DiSanto’s Ancora Advisors, Nathaniel August’s Mangrove Partners, and Louis Navellier’s Navellier & Associates.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Teekay Tankers Ltd. (NYSE:TNK) but similarly valued. These stocks are Oyster Point Pharma, Inc. (NASDAQ:OYST), Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), and National Bank Holdings Corp (NYSE:NBHC). This group of stocks’ market valuations resemble TNK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OYST 4 1827 1
PHAT 6 311386 -1
BHLB 15 23209 6
NBHC 8 47803 -1
Average 8.25 96056 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $67 million in TNK’s case. Berkshire Hills Bancorp, Inc. (NYSE:BHLB) is the most popular stock in this table. On the other hand Oyster Point Pharma, Inc. (NASDAQ:OYST) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Teekay Tankers Ltd. (NYSE:TNK) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately TNK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TNK were disappointed as the stock returned -33.9% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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