Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is Trustmark Corp (NASDAQ:TRMK) a bargain? Hedge funds are getting more optimistic. The number of bullish hedge fund positions advanced by 1 recently. Our calculations also showed that trmk 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’ 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a peek at the new hedge fund action encompassing Trustmark Corp (NASDAQ:TRMK).
What does smart money think about Trustmark Corp (NASDAQ:TRMK)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in TRMK over the last 15 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Trustmark Corp (NASDAQ:TRMK), with a stake worth $18.4 million reported as of the end of March. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $6 million. Two Sigma Advisors, GLG Partners, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in Trustmark Corp (NASDAQ:TRMK). Millennium Management had $18.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $2.1 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to Trustmark Corp (NASDAQ:TRMK). These stocks are Aerie Pharmaceuticals Inc (NASDAQ:AERI), DiamondRock Hospitality Company (NYSE:DRH), Zuora, Inc. (NYSE:ZUO), and Carpenter Technology Corporation (NYSE:CRS). This group of stocks’ market values are similar to TRMK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AERI | 23 | 532150 | 0 |
| DRH | 13 | 206595 | -6 |
| ZUO | 21 | 116298 | 7 |
| CRS | 13 | 82466 | -2 |
| Average | 17.5 | 234377 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $37 million in TRMK’s case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Trustmark Corp (NASDAQ:TRMK) is even less popular than DRH. Hedge funds dodged a bullet by taking a bearish stance towards TRMK. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TRMK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TRMK investors were disappointed as the stock returned -3.8% during the same time frame 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 the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
