Here is What Hedge Funds Think About Timkensteel Corp (TMST)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Timkensteel Corp (NYSE:TMST) investors should pay attention to a decrease in hedge fund interest lately. TMST was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. There were 19 hedge funds in our database with TMST positions at the end of the previous quarter. At the end of this article we will also compare TMST to other stocks including Harmonic Inc (NASDAQ:HLIT), Sierra Wireless, Inc. (USA) (NASDAQ:SWIR), and Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) 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 latest action encompassing Timkensteel Corp (NYSE:TMST).

What have hedge funds been doing with Timkensteel Corp (NYSE:TMST)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a plunge of 37% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TMST 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.

When looking at the institutional investors followed by Insider Monkey, D E Shaw, one of the world’s biggest hedge funds, has the most valuable position in Timkensteel Corp (NYSE:TMST), worth close to $9.8 million, accounting for less than 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Beddow Capital Management, led by Ed Beddow and William Tichy, which holds a $7.8 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Chuck Royce’s Royce & Associates, Howard Guberman’s Gruss Asset Management and Jim Simons’s Renaissance Technologies. 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.

Due to the fact that Timkensteel Corp (NYSE:TMST) has sustained declining sentiment from hedge fund managers, we can see that there were a few funds that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest stake of the 700 funds tracked by Insider Monkey, valued at about $2.2 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund said goodbye to about $1.6 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Timkensteel Corp (NYSE:TMST) but similarly valued. These stocks are Harmonic Inc (NASDAQ:HLIT), Sierra Wireless, Inc. (USA) (NASDAQ:SWIR), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), and Cascade Bancorp (NASDAQ:CACB). This group of stocks’ market caps match TMST’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $42 million in TMST’s case. Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) is the most popular stock in this table. On the other hand Sierra Wireless, Inc. (USA) (NASDAQ:SWIR) is the least popular one with only 8 bullish hedge fund positions. Timkensteel Corp (NYSE:TMST) 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 RUTH might be a better candidate to consider taking a long position in.

Disclosure: none.