Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Twin River Worldwide Holdings Inc. (NYSE:TRWH) changed recently.
Is Twin River Worldwide Holdings Inc. (NYSE:TRWH) undervalued? Prominent investors are in an optimistic mood. The number of long hedge fund bets advanced by 4 recently. Our calculations also showed that TRWH isn’t among the 30 most popular stocks among hedge funds (see the video below). TRWH was in 14 hedge funds’ portfolios at the end of June. There were 10 hedge funds in our database with TRWH positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the recent hedge fund action surrounding Twin River Worldwide Holdings Inc. (NYSE:TRWH).
How are hedge funds trading Twin River Worldwide Holdings Inc. (NYSE:TRWH)?
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in TRWH a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Twin River Worldwide Holdings Inc. (NYSE:TRWH) was held by Solus Alternative Asset Management, which reported holding $109.8 million worth of stock at the end of March. It was followed by HG Vora Capital Management with a $44.6 million position. Other investors bullish on the company included PAR Capital Management, Omega Advisors, and North Fourth Asset Management.
Now, key money managers have been driving this bullishness. North Fourth Asset Management, managed by Anthony Joseph Vaccarino, created the biggest position in Twin River Worldwide Holdings Inc. (NYSE:TRWH). North Fourth Asset Management had $5.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $4.8 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Karim Abbadi and Edward McBride’s Centiva Capital, and Frederick DiSanto’s Ancora Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Twin River Worldwide Holdings Inc. (NYSE:TRWH) but similarly valued. We will take a look at Michaels Companies Inc (NASDAQ:MIK), Diamond Offshore Drilling Inc (NYSE:DO), AZZ Incorporated (NYSE:AZZ), and Epizyme Inc (NASDAQ:EPZM). This group of stocks’ market caps are similar to TRWH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $256 million in TRWH’s case. Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand Diamond Offshore Drilling Inc (NYSE:DO) is the least popular one with only 13 bullish hedge fund positions. Twin River Worldwide Holdings Inc. (NYSE:TRWH) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TRWH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TRWH investors were disappointed as the stock returned -23% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.