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Hedge Funds Were Getting Burned By Triton International Limited (TRTN) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Triton International Limited (NYSE:TRTN) based on those filings.

Triton International Limited (NYSE:TRTN) was in 16 hedge funds’ portfolios at the end of December. TRTN investors should pay attention to an increase in enthusiasm from smart money lately. There were 15 hedge funds in our database with TRTN positions at the end of the previous quarter. Our calculations also showed that TRTN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Roger Ibbotson of Zebra Capital Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the key hedge fund action regarding Triton International Limited (NYSE:TRTN).

What does smart money think about Triton International Limited (NYSE:TRTN)?

At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TRTN over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Triton International Limited (NYSE:TRTN), which was worth $14.7 million at the end of the third quarter. On the second spot was Spindletop Capital which amassed $9.4 million worth of shares. Arrowstreet Capital, GLG Partners, and PEAK6 Capital Management 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 Spindletop Capital allocated the biggest weight to Triton International Limited (NYSE:TRTN), around 8.91% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to TRTN.

As one would reasonably expect, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Triton International Limited (NYSE:TRTN). Marshall Wace LLP had $1 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Roger Ibbotson’s Zebra Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Triton International Limited (NYSE:TRTN) but similarly valued. These stocks are AllianceBernstein Holding LP (NYSE:AB), Ryder System, Inc. (NYSE:R), Grocery Outlet Holding Corp. (NASDAQ:GO), and Guangshen Railway Co. Ltd (NYSE:GSH). This group of stocks’ market valuations are closest to TRTN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AB 11 53571 3
R 23 347690 1
GO 14 78999 -1
GSH 1 4453 -2
Average 12.25 121178 0.25

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 $121 million. That figure was $56 million in TRTN’s case. Ryder System, Inc. (NYSE:R) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Triton International Limited (NYSE:TRTN) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately TRTN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TRTN were disappointed as the stock returned -33.7% during the same time 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 many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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