Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Trinity Industries Inc (NYSE:TRN).
Is Trinity Industries Inc (NYSE:TRN) going to take off soon? Money managers are getting more bullish. The number of long hedge fund bets moved up by 2 in recent months. TRN was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. There were 22 hedge funds in our database with TRN 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 Corporate Office Properties Trust (NYSE:OFC), Jack in the Box Inc. (NASDAQ:JACK), and Prospect Capital Corporation (NASDAQ:PSEC) 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.
Keeping this in mind, we’re going to take a peek at the latest action encompassing Trinity Industries Inc (NYSE:TRN).
What have hedge funds been doing with Trinity Industries Inc (NYSE:TRN)?
Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, 9% higher from the second quarter of 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, ValueAct Capital, managed by Jeffrey Ubben, holds the biggest position in Trinity Industries Inc (NYSE:TRN). The activist hedge fund has a $300.3 million position in the stock, comprising 2.6% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $52.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Matt Sirovich and Jeremy Mindich’s Scopia Capital, Ric Dillon’s Diamond Hill Capital and Israel Englander’s Millennium Management.
Now, key hedge funds have been driving this bullishness. 13D Management, run by Kenneth Squire, created the largest position in Trinity Industries Inc (NYSE:TRN). According to its latest 13F filing, the fund had $6.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $5.7 million investment in the stock during the quarter. The other funds with brand new TRN positions are Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group, and Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Trinity Industries Inc (NYSE:TRN) but similarly valued. These stocks are Corporate Office Properties Trust (NYSE:OFC), Jack in the Box Inc. (NASDAQ:JACK), Prospect Capital Corporation (NASDAQ:PSEC), and Superior Energy Services, Inc. (NYSE:SPN). All of these stocks’ market caps match TRN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $554 million in TRN’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Corporate Office Properties Trust (NYSE:OFC) is the least popular one with only 10 bullish hedge fund positions. Trinity Industries Inc (NYSE:TRN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard JACK might be a better candidate to consider a long position.