Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Tennant Company (NYSE:TNC) based on that data and determine whether they were really smart about the stock.
Hedge fund interest in Tennant Company (NYSE:TNC) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Six Flags Entertainment Corp (NYSE:SIX), Asbury Automotive Group, Inc. (NYSE:ABG), and Heron Therapeutics Inc (NASDAQ:HRTX) to gather more data points. Our calculations also showed that TNC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the latest hedge fund action regarding Tennant Company (NYSE:TNC).
How are hedge funds trading Tennant Company (NYSE:TNC)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TNC over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the largest position in Tennant Company (NYSE:TNC), worth close to $61 million, comprising 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Mario Gabelli of GAMCO Investors, with a $18.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Tennant Company (NYSE:TNC), around 0.83% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.28 percent of its 13F equity portfolio to TNC.
Since Tennant Company (NYSE:TNC) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that slashed their full holdings heading into Q4. Intriguingly, Peter Muller’s PDT Partners said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $0.8 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tennant Company (NYSE:TNC) but similarly valued. We will take a look at Six Flags Entertainment Corp (NYSE:SIX), Asbury Automotive Group, Inc. (NYSE:ABG), Heron Therapeutics Inc (NASDAQ:HRTX), and Marcus & Millichap Inc (NYSE:MMI). This group of stocks’ market values match TNC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIX | 30 | 240206 | -8 |
| ABG | 19 | 248518 | -5 |
| HRTX | 19 | 223346 | 0 |
| MMI | 9 | 83327 | -4 |
| Average | 19.25 | 198849 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $89 million in TNC’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Marcus & Millichap Inc (NYSE:MMI) is the least popular one with only 9 bullish hedge fund positions. Tennant Company (NYSE:TNC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately TNC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TNC investors were disappointed as the stock returned 12.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
