World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Teekay Corporation (NYSE:TK) has seen an increase in activity from the world’s largest hedge funds in recent months. TK was in 10 hedge funds’ portfolios at the end of the first quarter of 2019. There were 7 hedge funds in our database with TK positions at the end of the previous quarter. Our calculations also showed that tk isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s check out the key hedge fund action regarding Teekay Corporation (NYSE:TK).
How have hedgies been trading Teekay Corporation (NYSE:TK)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from the fourth quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in TK a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, William B. Gray’s Orbis Investment Management has the number one position in Teekay Corporation (NYSE:TK), worth close to $6 million, amounting to less than 0.1%% of its total 13F portfolio. On Orbis Investment Management’s heels is Renaissance Technologies, led by Jim Simons, holding a $5.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors.
As industrywide interest jumped, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the largest position in Teekay Corporation (NYSE:TK). Millennium Management had $0.7 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new TK position is Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s go over hedge fund activity in other stocks similar to Teekay Corporation (NYSE:TK). These stocks are Mistras Group, Inc. (NYSE:MG), Roadrunner Transportation Systems Inc (NYSE:RRTS), Gogo Inc (NASDAQ:GOGO), and CryoPort, Inc. (NASDAQ:CYRX). This group of stocks’ market valuations resemble TK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MG | 10 | 27593 | -2 |
| RRTS | 7 | 356885 | 1 |
| GOGO | 12 | 76961 | 1 |
| CYRX | 7 | 6423 | 3 |
| Average | 9 | 116966 | 0.75 |
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 $117 million. That figure was $16 million in TK’s case. Gogo Inc (NASDAQ:GOGO) is the most popular stock in this table. On the other hand Roadrunner Transportation Systems Inc (NYSE:RRTS) is the least popular one with only 7 bullish hedge fund positions. Teekay Corporation (NYSE:TK) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TK were disappointed as the stock returned -18.1% 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.
