Did Hedge Funds Drop The Ball On Trupanion Inc (TRUP) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Trupanion Inc (NASDAQ:TRUP).

Trupanion Inc (NASDAQ:TRUP) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of September. At the end of this article we will also compare TRUP to other stocks including Banco BBVA Argentina S.A. (NYSE:BBAR), Extreme Networks, Inc (NASDAQ:EXTR), and Social Capital Hedosophia Holdings Corp. (NYSE:IPOA) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a multitude of indicators investors have at their disposal to evaluate publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the market by a solid margin (see the details here).

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the recent hedge fund action regarding Trupanion Inc (NASDAQ:TRUP).

How have hedgies been trading Trupanion Inc (NASDAQ:TRUP)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in TRUP a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Trupanion Inc (NASDAQ:TRUP) was held by Nine Ten Partners, which reported holding $77.2 million worth of stock at the end of September. It was followed by Greenlea Lane Capital with a $16.1 million position. Other investors bullish on the company included StackLine Partners, Royce & Associates, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Trupanion Inc (NASDAQ:TRUP), around 24.43% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, dishing out 9.34 percent of its 13F equity portfolio to TRUP.

Due to the fact that Trupanion Inc (NASDAQ:TRUP) has experienced falling interest from hedge fund managers, it’s safe to say that there were a few fund managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Paul Tudor Jones’s Tudor Investment Corp dumped the largest investment of the 750 funds monitored by Insider Monkey, totaling close to $0.7 million in stock, and Frank Slattery’s Symmetry Peak Management was right behind this move, as the fund sold off about $0.4 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trupanion Inc (NASDAQ:TRUP) but similarly valued. These stocks are Banco BBVA Argentina S.A. (NYSE:BBAR), Extreme Networks, Inc (NASDAQ:EXTR), Social Capital Hedosophia Holdings Corp. (NYSE:IPOA), and Aerie Pharmaceuticals Inc (NASDAQ:AERI). This group of stocks’ market caps match TRUP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBAR 9 6431 1
EXTR 16 120270 -3
IPOA 25 327427 2
AERI 28 324001 10
Average 19.5 194532 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $123 million in TRUP’s case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand Banco BBVA Argentina S.A. (NYSE:BBAR) is the least popular one with only 9 bullish hedge fund positions. Trupanion Inc (NASDAQ:TRUP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on TRUP as the stock returned 34.1% during the first two months of Q4 and outperformed the market by an even larger margin.

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