In this article you are going to find out whether hedge funds think TC Energy Corporation (NYSE:TRP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is TRP a good stock to buy now? TC Energy Corporation (NYSE:TRP) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. TC Energy Corporation (NYSE:TRP) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. There were 21 hedge funds in our database with TRP positions at the end of the second quarter. Our calculations also showed that TRP isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a glance at the fresh hedge fund action surrounding TC Energy Corporation (NYSE:TRP).
Do Hedge Funds Think TRP Is A Good Stock To Buy Now?
At third quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in TRP a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Robert Richards’s Heathbridge Capital Management has the largest position in TC Energy Corporation (NYSE:TRP), worth close to $20.5 million, corresponding to 8% of its total 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $19 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Henry Breck’s Heronetta Management. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to TC Energy Corporation (NYSE:TRP), around 8.01% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, designating 5.53 percent of its 13F equity portfolio to TRP.
Judging by the fact that TC Energy Corporation (NYSE:TRP) has witnessed bearish sentiment from the smart money, it’s easy to see that there was a specific group of hedge funds who sold off their positions entirely in the third quarter. At the top of the heap, Jonathan Barrett and Paul Segal’s Luminus Management said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, valued at about $27.2 million in stock. Renaissance Technologies, also dropped its stock, about $16.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TC Energy Corporation (NYSE:TRP) but similarly valued. We will take a look at DexCom, Inc. (NASDAQ:DXCM), Emerson Electric Co. (NYSE:EMR), Public Storage (NYSE:PSA), Itau Unibanco Holding SA (NYSE:ITUB), Keurig Dr Pepper Inc. (NASDAQ:KDP), Snap Inc. (NYSE:SNAP), and Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG). This group of stocks’ market caps match TRP’s market cap.
|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 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $787 million. That figure was $84 million in TRP’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 8 bullish hedge fund positions. TC Energy Corporation (NYSE:TRP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TRP is 28. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately TRP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TRP investors were disappointed as the stock returned 5.2% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.