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Is TransUnion (TRU) Going to Burn These Hedge Funds?

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 and abilities to conduct an extensive stock analysis on small-cap stocks, which enable 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.

TransUnion (NYSE:TRU) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 29 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), United Rentals, Inc. (NYSE:URI), and Eastman Chemical Company (NYSE:EMN) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Lone Pine Capital 2015 Q2 Investor Letter

We’re going to go over the latest hedge fund action surrounding TransUnion (NYSE:TRU).

How have hedgies been trading TransUnion (NYSE:TRU)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in TRU heading into this year. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with TRU Positions

More specifically, Lone Pine Capital was the largest shareholder of TransUnion (NYSE:TRU), with a stake worth $722.5 million reported as of the end of September. Trailing Lone Pine Capital was Farallon Capital, which amassed a stake valued at $252.2 million. Egerton Capital Limited, Arrowstreet Capital, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

Since TransUnion (NYSE:TRU) has experienced bearish sentiment from hedge fund managers, we can see that there exists a select few money managers that slashed their full holdings last quarter. Intriguingly, Israel Englander’s Millennium Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, comprising about $53.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $17.5 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TransUnion (NYSE:TRU) but similarly valued. We will take a look at C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), United Rentals, Inc. (NYSE:URI), Eastman Chemical Company (NYSE:EMN), and CDW Corporation (NASDAQ:CDW). This group of stocks’ market valuations match TRU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHRW 28 457937 -2
URI 48 1131355 8
EMN 25 455394 -2
CDW 28 627369 8
Average 32.25 668014 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $668 million. That figure was $1.76 billion in TRU’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Eastman Chemical Company (NYSE:EMN) is the least popular one with only 25 bullish hedge fund positions. TransUnion (NYSE:TRU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard URI might be a better candidate to consider a long position.

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

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