At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Turquoise Hill Resources Ltd (NYSE:TRQ) makes for a good investment right now.
Is TRQ a good stock to buy now? TRQ was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 23. TRQ investors should be aware of a decrease in enthusiasm from smart money of late. There were 13 hedge funds in our database with TRQ holdings at the end of June. Our calculations also showed that TRQ 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. Keeping this in mind we’re going to analyze the new hedge fund action encompassing Turquoise Hill Resources Ltd (NYSE:TRQ).
Do Hedge Funds Think TRQ Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TRQ over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Turquoise Hill Resources Ltd (NYSE:TRQ) was held by Pentwater Capital Management, which reported holding $156.7 million worth of stock at the end of September. It was followed by Kopernik Global Investors with a $76.4 million position. Other investors bullish on the company included SailingStone Capital Partners, Shah Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Turquoise Hill Resources Ltd (NYSE:TRQ), around 19.59% of its 13F portfolio. Kopernik Global Investors is also relatively very bullish on the stock, dishing out 11.84 percent of its 13F equity portfolio to TRQ.
Due to the fact that Turquoise Hill Resources Ltd (NYSE:TRQ) has witnessed bearish sentiment from the smart money, we can see that there were a few fund managers that slashed their full holdings last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest position of all the hedgies followed by Insider Monkey, worth an estimated $0.4 million in stock. Eric Sprott’s fund, Sprott Asset Management, also dropped its stock, about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Turquoise Hill Resources Ltd (NYSE:TRQ). We will take a look at Range Resources Corp. (NYSE:RRC), Genworth Financial Inc (NYSE:GNW), Flagstar Bancorp Inc (NYSE:FBC), TransAlta Corporation (NYSE:TAC), Atlantic Union Bankshares Corporation (NASDAQ:AUB), Repay Holdings Corporation (NASDAQ:RPAY), and Dycom Industries, Inc. (NYSE:DY). This group of stocks’ market valuations match TRQ’s market valuation.
|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 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $305 million in TRQ’s case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Turquoise Hill Resources Ltd (NYSE:TRQ) is even less popular than AUB. Our overall hedge fund sentiment score for TRQ is 12.7. 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. Hedge funds clearly dropped the ball on TRQ as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TRQ as the stock returned 34.8% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.