Is Third Point Reinsurance Ltd (TPRE) A Good Stock To Buy?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Third Point Reinsurance Ltd (NYSE:TPRE) based on that data.

Third Point Reinsurance Ltd (NYSE:TPRE) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. TPRE investors should be aware of a decrease in hedge fund sentiment recently. There were 20 hedge funds in our database with TPRE positions at the end of the previous quarter. Our calculations also showed that TPRE 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Third Point Reinsurance Ltd (NYSE:TPRE).

How are hedge funds trading Third Point Reinsurance Ltd (NYSE:TPRE)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in TPRE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Third Point Reinsurance Ltd (NYSE:TPRE), with a stake worth $10.3 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $5.8 million. GLG Partners, Winton Capital Management, and Two Sigma Advisors 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 Sonic Capital allocated the biggest weight to Third Point Reinsurance Ltd (NYSE:TPRE), around 2.26% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 1.09 percent of its 13F equity portfolio to TPRE.

Due to the fact that Third Point Reinsurance Ltd (NYSE:TPRE) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers that decided to sell off their full holdings by the end of the first quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest investment of all the hedgies followed by Insider Monkey, totaling close to $2.9 million in stock. Nathaniel August’s fund, Mangrove Partners, also dropped its stock, about $1.1 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Third Point Reinsurance Ltd (NYSE:TPRE). These stocks are Novavax, Inc. (NASDAQ:NVAX), INTL Fcstone Inc (NASDAQ:INTL), BRP Inc. (NASDAQ:DOOO), and Trinseo S.A. (NYSE:TSE). This group of stocks’ market valuations match TPRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVAX 4 11335 1
INTL 10 83773 1
DOOO 10 52931 1
TSE 17 26358 -1
Average 10.25 43599 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $40 million in TPRE’s case. Trinseo S.A. (NYSE:TSE) is the most popular stock in this table. On the other hand Novavax, Inc. (NASDAQ:NVAX) is the least popular one with only 4 bullish hedge fund positions. Third Point Reinsurance Ltd (NYSE:TPRE) 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 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 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately TPRE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TPRE were disappointed as the stock returned -0.1% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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