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Is TC Pipelines, LP (TCP) Going to Burn These Hedge Funds?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about TC Pipelines, LP (NYSE:TCP) in this article.

Hedge fund interest in TC Pipelines, LP (NYSE:TCP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare TCP to other stocks including Advanced Disposal Services, Inc. (NYSE:ADSW), Magnolia Oil & Gas Corporation (NASDAQ:MGY), and BlackBerry Limited (NYSE:BB) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are a multitude of gauges stock market investors employ to grade publicly traded companies. A pair of the less utilized gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best investment managers can trounce their index-focused peers by a significant amount (see the details here).

Ken Griffin

Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s go over the new hedge fund action regarding TC Pipelines, LP (NYSE:TCP).

How are hedge funds trading TC Pipelines, LP (NYSE:TCP)?

At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in TCP a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is TCP A Good Stock To Buy?

The largest stake in TC Pipelines, LP (NYSE:TCP) was held by Arrowstreet Capital, which reported holding $14.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $1.1 million position. Other investors bullish on the company included Renaissance Technologies, Driehaus Capital, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Chiron Investment Management allocated the biggest weight to TC Pipelines, LP (NYSE:TCP), around 0.05% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to TCP.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TC Pipelines, LP (NYSE:TCP) but similarly valued. These stocks are Advanced Disposal Services, Inc. (NYSE:ADSW), Magnolia Oil & Gas Corporation (NASDAQ:MGY), BlackBerry Limited (NYSE:BB), and Novanta Inc. (NASDAQ:NOVT). This group of stocks’ market values resemble TCP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADSW 24 668160 -2
MGY 17 132628 -2
BB 28 401792 3
NOVT 9 46032 -4
Average 19.5 312153 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $17 million in TCP’s case. BlackBerry Limited (NYSE:BB) is the most popular stock in this table. On the other hand Novanta Inc. (NASDAQ:NOVT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks TC Pipelines, LP (NYSE:TCP) is even less popular than NOVT. Hedge funds dodged a bullet by taking a bearish stance towards TCP. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TCP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TCP investors were disappointed as the stock returned -2.5% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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