Hedge Funds Are Dumping TransAlta Corporation (USA) (TAC)

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze TransAlta Corporation (USA) (NYSE:TAC) .

Is TransAlta Corporation (USA) (NYSE:TAC) going to take off soon? Hedge funds are surely in a pessimistic mood. The number of long hedge fund bets contracted by1 in recent months. TAC was in 7 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with TAC positions at the end of the previous quarter. At the end of this article we will also compare TAC to other stocks including Spartan Stores, Inc. (NASDAQ:SPTN), Four Corners Property Trust Inc(NYSE:FCPT), and Cabot Microelectronics Corporation (NASDAQ:CCMP) to get a better sense of its popularity.

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.

Now, we’re going to review the fresh action encompassing TransAlta Corporation (USA) (NYSE:TAC).

What does the smart money think about TransAlta Corporation (USA) (NYSE:TAC)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TAC over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Vertex One Asset Management, led by John Thiessen, holds the most valuable position in TransAlta Corporation (USA) (NYSE:TAC). Vertex One Asset Management has a $26 million position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is D E Shaw, one of the biggest hedge funds in the world, with a $3.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include Jim Simons’s Renaissance Technologies, Cliff Asness’s AQR Capital Management and Glenn Russell Dubin’s Highbridge Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. Interestingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, worth close to $0.2 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, about $0.1 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to TransAlta Corporation (USA) (NYSE:TAC). We will take a look at Spartan Stores, Inc. (NASDAQ:SPTN), Four Corners Property Trust Inc(NYSE:FCPT), Cabot Microelectronics Corporation (NASDAQ:CCMP), and Consolidated Communications Holdings Inc (NASDAQ:CNSL). This group of stocks’ market valuations are similar to TAC’s market valuation.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $32 million in TAC’s case. Four Corners Property Trust Inc(NYSE:FCPT) is the most popular stock in this table. On the other hand Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the least popular one with only 6 bullish hedge fund positions. TransAlta Corporation (USA) (NYSE:TAC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FCPT might be a better candidate to consider taking a long position in.

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