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Is TransAlta Corporation (USA) (TAC) Going to Power These Hedge Funds’ Returns?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources to conduct extensive stock analysis on small-cap stocks, which enables them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.


One such stock is TransAlta Corporation (USA) (NYSE:TAC), which has seen an increase in support from the world’s most elite money managers of late. At the end of this article we will also compare TAC to other stocks including Companhia Siderurgica Nacional (ADR) (NYSE:SID), Rent-A-Center Inc (NASDAQ:RCII), and Nevro Corp (NYSE:NVRO) to get a better sense of its popularity.

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According to most traders, hedge funds are viewed as worthless, outdated investment vehicles of years past. While there are over 8,000 funds with their doors open today, Experts at Insider Monkey, a website specializing in hedge funds, choose to focus on the masters of this group, approximately 700 funds. Most estimates calculate that this group of people preside over most of the hedge fund industry’s total capital, and by following their best stock picks, Insider Monkey has found many investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in its back tests.

Now, let’s check out the recent action regarding TransAlta Corporation (USA) (NYSE:TAC).

Hedge fund activity in TransAlta Corporation (USA) (NYSE:TAC)

At Q3’s end, a total of six of the hedge funds tracked by Insider Monkey were bullish in this stock, up by 20% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably.

Of the funds tracked by Insider Monkey, Luminus Management, managed by Jonathan Barrett and Paul Segal, holds the largest position in TransAlta Corporation (USA) (NYSE:TAC). Luminus Management has a $79.7 million position in the stock, comprising 2.5% of its 13F portfolio. Coming in second is D E Shaw, founded by David E. Shaw, holding a $3.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions encompass Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Jim Simons’ Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.

With general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. LMR Partners initiated the most valuable position in TransAlta Corporation (USA) (NYSE:TAC). LMR Partners had $2 million invested in the company at the end of the quarter. Citadel Investment Group also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Jacob Gottlieb’s Visium Asset Management.

Let’s also review hedge fund activity in other stocks similar to TransAlta Corporation (USA) (NYSE:TAC). These stocks are Companhia Siderurgica Nacional (ADR) (NYSE:SID), Rent-A-Center Inc (NASDAQ:RCII), Nevro Corp (NYSE:NVRO), and Surgical Care Affiliates Inc (NASDAQ:SCAI). This group of stocks’ market caps match TAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SID 4 1076 -4
RCII 27 242535 -4
NVRO 21 221801 2
SCAI 16 59011 1

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. In TransAlta they held $86 million worth of shares on September 30. Rent-A-Center Inc (NASDAQ:RCII) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (ADR) (NYSE:SID) is the least popular one with only four bullish hedge fund positions. TransAlta Corporation (USA) (NYSE:TAC) is not the least popular stock in this group but hedge fund interest is still quite low. We’d rather spend our time researching stocks that hedge funds are piling on. In this regard RCII might be a better candidate to consider a long position in.

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