Hedge Funds Are Crazy About TC Energy Corporation (TRP)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in TC Energy Corporation (NYSE:TRP)? The smart money sentiment can provide an answer to this question.

TC Energy Corporation (NYSE:TRP) has experienced an increase in enthusiasm from smart money of late. TC Energy Corporation (NYSE:TRP) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 19 hedge funds in our database with TRP positions at the end of the fourth quarter. Our calculations also showed that TRP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Robert Richards of Heathbridge Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s check out the key hedge fund action surrounding TC Energy Corporation (NYSE:TRP).

Do Hedge Funds Think TRP Is A Good Stock To Buy Now?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in TRP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Schonfeld Strategic Advisors held the most valuable stake in TC Energy Corporation (NYSE:TRP), which was worth $232.1 million at the end of the fourth quarter. On the second spot was Marshall Wace LLP which amassed $43.4 million worth of shares. Millennium Management, Heathbridge Capital Management, and Renaissance Technologies 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 Heathbridge Capital Management allocated the biggest weight to TC Energy Corporation (NYSE:TRP), around 9% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, earmarking 4.8 percent of its 13F equity portfolio to TRP.

Consequently, specific money managers have been driving this bullishness. Renaissance Technologies, initiated the most valuable position in TC Energy Corporation (NYSE:TRP). Renaissance Technologies had $18.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $16.5 million investment in the stock during the quarter. The following funds were also among the new TRP investors: Vince Maddi and Shawn Brennan’s SIR Capital Management, Bruce Berkowitz’s Fairholme (FAIRX), and Bruce Kovner’s Caxton Associates LP.

Let’s also examine hedge fund activity in other stocks similar to TC Energy Corporation (NYSE:TRP). These stocks are Barclays PLC (NYSE:BCS), Eni SpA (NYSE:E), Banco Bradesco SA (NYSE:BBD), Ambev SA (NYSE:ABEV), Canadian Imperial Bank of Commerce (NYSE:CM), Thomson Reuters Corporation (NYSE:TRI), and Baxter International Inc. (NYSE:BAX). This group of stocks’ market valuations are similar to TRP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BCS 10 79712 -2
E 4 74023 0
BBD 19 186540 2
ABEV 18 228714 0
CM 14 408020 1
TRI 28 395480 5
BAX 40 3357530 -2
Average 19 675717 0.6

View table here if you experience formatting issues.

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 $676 million. That figure was $429 million in TRP’s case. Baxter International Inc. (NYSE:BAX) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. TC Energy Corporation (NYSE:TRP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRP is 69.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on TRP, though not to the same extent, as the stock returned 11.3% since Q1 (through July 9th) and outperformed the market as well.

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