Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Tredegar Corporation (NYSE:TG).
Is TG a good stock to buy now? Tredegar Corporation (NYSE:TG) has experienced an increase in hedge fund interest lately. Tredegar Corporation (NYSE:TG) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. There were 11 hedge funds in our database with TG holdings at the end of June. Our calculations also showed that TG isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 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 S&P 500 ETFs by 66 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 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Tredegar Corporation (NYSE:TG).
Do Hedge Funds Think TG Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TG over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GAMCO Investors was the largest shareholder of Tredegar Corporation (NYSE:TG), with a stake worth $42.8 million reported as of the end of September. Trailing GAMCO Investors was Arrowstreet Capital, which amassed a stake valued at $3.9 million. Renaissance Technologies, AQR Capital Management, and Zebra Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Tredegar Corporation (NYSE:TG), around 0.79% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.48 percent of its 13F equity portfolio to TG.
Now, key money managers have jumped into Tredegar Corporation (NYSE:TG) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Tredegar Corporation (NYSE:TG). Marshall Wace LLP had $0.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) also made a $0 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Tredegar Corporation (NYSE:TG). These stocks are The Bancorp, Inc. (NASDAQ:TBBK), FutureFuel Corp. (NYSE:FF), Varex Imaging Corporation (NASDAQ:VREX), Northern Dynasty Minerals Ltd. (NYSE:NAK), NOW Inc (NYSE:DNOW), A10 Networks Inc (NYSE:ATEN), and Stoneridge, Inc. (NYSE:SRI). This group of stocks’ market values are closest to TG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $52 million in TG’s case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand Northern Dynasty Minerals Ltd. (NYSE:NAK) is the least popular one with only 7 bullish hedge fund positions. Tredegar Corporation (NYSE:TG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TG is 46.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TG as the stock returned 56.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.