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Hedge Funds Are Betting On Trane Technologies plc (TT)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Trane Technologies plc (NYSE:TT) and determine whether the smart money was really smart about this stock.

Trane Technologies plc (NYSE:TT) has seen an increase in activity from the world’s largest hedge funds lately. Trane Technologies plc (NYSE:TT) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 36 hedge funds in our database with TT holdings at the end of March. Our calculations also showed that TT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to take a look at the new hedge fund action encompassing Trane Technologies plc (NYSE:TT).

How have hedgies been trading Trane Technologies plc (NYSE:TT)?

At Q2’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in TT a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Generation Investment Management was the largest shareholder of Trane Technologies plc (NYSE:TT), with a stake worth $297.1 million reported as of the end of September. Trailing Generation Investment Management was Impax Asset Management, which amassed a stake valued at $91.2 million. Millennium Management, D E Shaw, and Adage Capital Management 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 Ecofin Ltd allocated the biggest weight to Trane Technologies plc (NYSE:TT), around 1.8% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 1.71 percent of its 13F equity portfolio to TT.

Now, key hedge funds were breaking ground themselves. McKinley Capital Management, managed by Robert B. Gillam, initiated the most valuable position in Trane Technologies plc (NYSE:TT). McKinley Capital Management had $15.4 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $4.9 million investment in the stock during the quarter. The other funds with brand new TT positions are Louis Bacon’s Moore Global Investments, Benjamin A. Smith’s Laurion Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now review hedge fund activity in other stocks similar to Trane Technologies plc (NYSE:TT). We will take a look at TELUS Corporation (NYSE:TU), FleetCor Technologies, Inc. (NYSE:FLT), Aptiv PLC (NYSE:APTV), FirstEnergy Corp. (NYSE:FE), Simon Property Group, Inc (NYSE:SPG), Canon Inc. (NYSE:CAJ), and Equifax Inc. (NYSE:EFX). This group of stocks’ market values resemble TT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TU 15 194956 0
FLT 53 2212169 2
APTV 43 1158307 10
FE 41 992017 -3
SPG 27 531930 -2
CAJ 9 55132 2
EFX 28 1186553 -4
Average 30.9 904438 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $904 million. That figure was $730 million in TT’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 9 bullish hedge fund positions. Trane Technologies plc (NYSE:TT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TT is 74.2. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on TT as the stock returned 33.1% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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