Is TPRE A Good Stock To Buy Now?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Third Point Reinsurance Ltd (NYSE:TPRE).

Is TPRE a good stock to buy now? The best stock pickers were getting more optimistic. The number of long hedge fund bets increased by 1 in recent months. Third Point Reinsurance Ltd (NYSE:TPRE) was in 19 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that TPRE 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). There were 18 hedge funds in our database with TPRE holdings at the end of June.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are viewed as slow, outdated financial vehicles of the past. While there are greater than 8000 funds trading at present, Our researchers hone in on the moguls of this club, approximately 850 funds. These hedge fund managers preside over the majority of the smart money’s total asset base, and by keeping track of their matchless investments, Insider Monkey has determined several investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Arbiter Partners Capital Management's Returns, AUM and Holdings

Paul Isaac of Arbiter Partners Capital Management

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 check out the new hedge fund action surrounding Third Point Reinsurance Ltd (NYSE:TPRE).

Do Hedge Funds Think TPRE Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in TPRE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Third Point Reinsurance Ltd (NYSE:TPRE) was held by Renaissance Technologies, which reported holding $6.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $6.2 million position. Other investors bullish on the company included D E Shaw, Sonic Capital, and Arbiter Partners Capital Management. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Third Point Reinsurance Ltd (NYSE:TPRE), around 1.96% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.68 percent of its 13F equity portfolio to TPRE.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Third Point Reinsurance Ltd (NYSE:TPRE). Millennium Management had $0.7 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.1 million investment in the stock during the quarter. The other funds with brand new TPRE positions are Greg Eisner’s Engineers Gate Manager and Benjamin A. Smith’s Laurion Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Third Point Reinsurance Ltd (NYSE:TPRE) but similarly valued. We will take a look at Maverix Metals Inc. (NYSE:MMX), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), LeMaitre Vascular Inc (NASDAQ:LMAT), Argan, Inc. (NYSE:AGX), BJ’s Restaurants, Inc. (NASDAQ:BJRI), Photronics, Inc. (NASDAQ:PLAB), and American Axle & Manufacturing Holdings, Inc. (NYSE:AXL). 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
MMX 8 91332 3
BCSF 11 16870 0
LMAT 7 5081 -2
AGX 13 61268 2
BJRI 14 43978 2
PLAB 20 74020 -1
AXL 22 59546 2
Average 13.6 50299 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $30 million in TPRE’s case. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is the most popular stock in this table. On the other hand LeMaitre Vascular Inc (NASDAQ:LMAT) is the least popular one with only 7 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. Our overall hedge fund sentiment score for TPRE is 74.5. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on TPRE as the stock returned 36.5% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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