Is TransCanada Corporation (TRP) A Good Stock To Buy According To Hedge Funds?

Is TransCanada Corporation (NYSE:TRP) an attractive investment today? Money managers are taking an optimistic view. The number of bullish hedge fund bets inched up by 1 lately. Our calculations also showed that TRP isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.


Let’s take a look at the fresh hedge fund action surrounding TransCanada Corporation (NYSE:TRP).

What does the smart money think about TransCanada Corporation (NYSE:TRP)?

Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TRP over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, D E Shaw held the most valuable stake in TransCanada Corporation (NYSE:TRP), which was worth $65 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $61.5 million worth of shares. Moreover, Magnetar Capital, SIR Capital Management, and Bridgewater Associates were also bullish on TransCanada Corporation (NYSE:TRP), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, key money managers have been driving this bullishness. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, created the largest position in TransCanada Corporation (NYSE:TRP). SIR Capital Management had $15.9 million invested in the company at the end of the quarter. Till Bechtolsheimer’s Arosa Capital Management also made a $1.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TransCanada Corporation (NYSE:TRP) but similarly valued. These stocks are SYSCO Corporation (NYSE:SYY), Nokia Corporation (NYSE:NOK), Barclays PLC (NYSE:BCS), and Edwards Lifesciences Corporation (NYSE:EW). This group of stocks’ market values are closest to TRP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYY 34 2614998 3
NOK 27 613833 8
BCS 10 228838 -1
EW 23 461037 -6
Average 23.5 979677 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $980 million. That figure was $219 million in TRP’s case. SYSCO Corporation (NYSE:SYY) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 10 bullish hedge fund positions. TransCanada Corporation (NYSE:TRP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on TRP as the stock returned 26.5% and outperformed the market as well.

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