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 (see why hell is coming). 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 Tredegar Corporation (NYSE:TG) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Tredegar Corporation (NYSE:TG) was in 10 hedge funds’ portfolios at the end of March. TG investors should pay attention to an increase in hedge fund sentiment recently. There were 9 hedge funds in our database with TG holdings at the end of the previous quarter. Our calculations also showed that TG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the fresh hedge fund action regarding Tredegar Corporation (NYSE:TG).
What does smart money think about Tredegar Corporation (NYSE:TG)?
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TG over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tredegar Corporation (NYSE:TG) was held by GAMCO Investors, which reported holding $50.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $4.1 million position. Other investors bullish on the company included Renaissance Technologies, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Tredegar Corporation (NYSE:TG), around 0.76% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.6 percent of its 13F equity portfolio to TG.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in Tredegar Corporation (NYSE:TG). Citadel Investment Group had $0.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.3 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tredegar Corporation (NYSE:TG) but similarly valued. We will take a look at Westlake Chemical Partners LP (NYSE:WLKP), SpartanNash Company (NASDAQ:SPTN), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), and TPI Composites, Inc. (NASDAQ:TPIC). This group of stocks’ market values match TG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $61 million in TG’s case. SpartanNash Company (NASDAQ:SPTN) is the most popular stock in this table. On the other hand Westlake Chemical Partners LP (NYSE:WLKP) is the least popular one with only 3 bullish hedge fund positions. Tredegar Corporation (NYSE:TG) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately TG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TG investors were disappointed as the stock returned -0.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.