We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards TTM Technologies, Inc. (NASDAQ:TTMI) and determine whether hedge funds skillfully traded this stock.
TTM Technologies, Inc. (NASDAQ:TTMI) shareholders have witnessed an increase in hedge fund interest of late. TTM Technologies, Inc. (NASDAQ:TTMI) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. There were 10 hedge funds in our database with TTMI holdings at the end of March. Our calculations also showed that TTMI 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to analyze the recent hedge fund action surrounding TTM Technologies, Inc. (NASDAQ:TTMI).
What does smart money think about TTM Technologies, Inc. (NASDAQ:TTMI)?
Heading into the third quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 80% from the first quarter of 2020. By comparison, 9 hedge funds held shares or bullish call options in TTMI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TTM Technologies, Inc. (NASDAQ:TTMI) was held by Point72 Asset Management, which reported holding $25.8 million worth of stock at the end of September. It was followed by LMR Partners with a $19.8 million position. Other investors bullish on the company included Divisar Capital, Royce & Associates, and Select Equity Group. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to TTM Technologies, Inc. (NASDAQ:TTMI), around 4.64% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, dishing out 0.49 percent of its 13F equity portfolio to TTMI.
Now, key money managers were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the biggest position in TTM Technologies, Inc. (NASDAQ:TTMI). LMR Partners had $19.8 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also initiated a $4.7 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies, and Greg Eisner’s Engineers Gate Manager.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as TTM Technologies, Inc. (NASDAQ:TTMI) but similarly valued. These stocks are Matson Inc. (NYSE:MATX), Office Properties Income Trust (NASDAQ:OPI), Broadmark Realty Capital Inc. (NYSE:BRMK), Studio City International Holdings Limited (NYSE:MSC), Materion Corp (NYSE:MTRN), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), and Cardiovascular Systems Inc (NASDAQ:CSII). All of these stocks’ market caps are similar to TTMI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $85 million in TTMI’s case. Cardiovascular Systems Inc (NASDAQ:CSII) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 3 bullish hedge fund positions. TTM Technologies, Inc. (NASDAQ:TTMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TTMI is 78.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately TTMI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TTMI were disappointed as the stock returned -3.8% in Q3 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.