Hedge Funds Have Never Been This Bullish On TPI Composites, Inc. (TPIC)

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Is TPI Composites, Inc. (NASDAQ:TPIC) a buy right now? Investors who are in the know are betting on the stock. The number of bullish hedge fund bets improved by 6 lately. Our calculations also showed that tpic isn’t among the 30 most popular stocks among hedge funds. TPIC was in 19 hedge funds’ portfolios at the end of the first quarter of 2019. There were 13 hedge funds in our database with TPIC holdings at the end of the previous quarter.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Richard Driehaus

We’re going to analyze the latest hedge fund action regarding TPI Composites, Inc. (NASDAQ:TPIC).

Hedge fund activity in TPI Composites, Inc. (NASDAQ:TPIC)

Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TPIC over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

No of Hedge Funds with TPIC Positions

Among these funds, Trigran Investments held the most valuable stake in TPI Composites, Inc. (NASDAQ:TPIC), which was worth $50.1 million at the end of the first quarter. On the second spot was Inherent Group which amassed $18.5 million worth of shares. Moreover, Parian Global Management, Driehaus Capital, and Redwood Capital Management were also bullish on TPI Composites, Inc. (NASDAQ:TPIC), allocating a large percentage of their portfolios to this stock.

Consequently, key money managers were breaking ground themselves. Inherent Group, managed by Tony Davis, created the most valuable position in TPI Composites, Inc. (NASDAQ:TPIC). Inherent Group had $18.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $1 million position during the quarter. The following funds were also among the new TPIC investors: Charles Paquelet’s Skylands Capital, Israel Englander’s Millennium Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TPI Composites, Inc. (NASDAQ:TPIC) but similarly valued. These stocks are Celestica Inc. (NYSE:CLS), BJ’s Restaurants, Inc. (NASDAQ:BJRI), Sandstorm Gold Ltd. (NYSE:SAND), and Hailiang Education Group Inc. (NASDAQ:HLG). This group of stocks’ market values match TPIC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLS 15 81881 1
BJRI 19 150999 -2
SAND 12 44973 3
HLG 3 5277 0
Average 12.25 70783 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $137 million in TPIC’s case. BJ’s Restaurants, Inc. (NASDAQ:BJRI) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 3 bullish hedge fund positions. TPI Composites, Inc. (NASDAQ:TPIC) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TPIC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TPIC were disappointed as the stock returned -25% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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