After several tireless days, we have finished crunching the numbers from the more than 700 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Tejon Ranch Company (NYSE:TRC).
Is Tejon Ranch an exceptional investment today? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions were trimmed by 2 recently. Our calculations also showed that TRC isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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.
While completing our research for this write-up, we came across Laughing Water Capital’s Quarterly Report that gave its opinion on the company, in which it has a position. We bring you a snippet of that letter:
“In the case of TRC, our assessment of value was tied to unique real estate, and we had hard evidence from the market that there was substantial demand for the stock at or near our purchase price as there was a rights offering that was oversubscribed by 100%.”
Our readers will be interested to know that Geoffrey L. Stack was responsible for the last major purchase of the company’s common stock. Stack purchased 5,555 shares at $18.00 in November 2017. The company’s shares currently trade at $17.02.
Hedge fund activity in Tejon Ranch Company (NYSE:TRC)
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in TRC at the beginning of this year. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Tejon Ranch Company (NYSE:TRC), which was worth $35.5 million at the end of the third quarter. On the second spot was Third Avenue Management which amassed $27.8 million worth of shares. Moreover, GAMCO Investors, Ariel Investments, and MFP Investors were also bullish on Tejon Ranch Company (NYSE:TRC), allocating a large percentage of their portfolios to this stock.
Seeing as Tejon Ranch Company (NYSE:TRC) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, valued at about $1.5 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $0.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tejon Ranch Company (NYSE:TRC) but similarly valued. We will take a look at Catchmark Timber Trust Inc (NYSE:CTT), First Community Bancshares Inc (NASDAQ:FCBC), Neuronetics, Inc. (NASDAQ:STIM), and Cambium Learning Group, Inc. (NASDAQ:ABCD). This group of stocks’ market values are closest to TRC’s market value.
|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 9 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $108 million in TRC’s case. Catchmark Timber Trust Inc (NYSE:CTT) is the most popular stock in this table. On the other hand First Community Bancshares Inc (NASDAQ:FCBC) is the least popular one with only 4 bullish hedge fund positions. Tejon Ranch Company (NYSE:TRC) 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. In this regard CTT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.