Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in TRC Companies, Inc. (NYSE:TRR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare TRR to other stocks including Syndax Pharmaceuticals Inc (NASDAQ:SNDX), Gladstone Investment Corporation (NASDAQ:GAIN), and Tilly’s Inc (NYSE:TLYS) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Now, let’s take a look at the recent action regarding TRC Companies, Inc. (NYSE:TRR).
Hedge fund activity in TRC Companies, Inc. (NYSE:TRR)
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 11 hedge funds with a bullish position in TRR at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in TRC Companies, Inc. (NYSE:TRR), worth close to $19.7 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $4.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks similar to TRC Companies, Inc. (NYSE:TRR). We will take a look at Syndax Pharmaceuticals Inc (NASDAQ:SNDX), Gladstone Investment Corporation (NASDAQ:GAIN), Tilly’s Inc (NYSE:TLYS), and Limoneira Company (NASDAQ:LMNR). All of these stocks’ market caps match TRR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $25 million in TRR’s case. Tilly’s Inc (NYSE:TLYS) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 2 bullish hedge fund positions. TRC Companies, Inc. (NYSE:TRR) 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 TLYS might be a better candidate to consider taking a long position in.