Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about TrustCo Bank Corp NY (NASDAQ:TRST).
Is TRST a good stock to buy now? TrustCo Bank Corp NY (NASDAQ:TRST) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TRST has seen an increase in enthusiasm from smart money recently. There were 13 hedge funds in our database with TRST positions at the end of the second quarter. Our calculations also showed that TRST 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. With all of this in mind let’s take a look at the recent hedge fund action surrounding TrustCo Bank Corp NY (NASDAQ:TRST).
Do Hedge Funds Think TRST Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in TRST a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in TrustCo Bank Corp NY (NASDAQ:TRST), which was worth $5.1 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $3.5 million worth of shares. Two Sigma Advisors, Millennium Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to TrustCo Bank Corp NY (NASDAQ:TRST), around 0.04% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to TRST.
Now, some big names were leading the bulls’ herd. Engineers Gate Manager, managed by Greg Eisner, established the biggest position in TrustCo Bank Corp NY (NASDAQ:TRST). Engineers Gate Manager had $0.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.1 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks similar to TrustCo Bank Corp NY (NASDAQ:TRST). These stocks are Atreca, Inc. (NASDAQ:BCEL), Community Trust Bancorp, Inc. (NASDAQ:CTBI), ScanSource, Inc. (NASDAQ:SCSC), Anika Therapeutics, Inc. (NASDAQ:ANIK), Lakeland Bancorp, Inc. (NASDAQ:LBAI), Origin Bancorp, Inc. (NASDAQ:OBNK), and TCG BDC, Inc. (NASDAQ:CGBD). This group of stocks’ market values resemble TRST’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 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $16 million in TRST’s case. Anika Therapeutics, Inc. (NASDAQ:ANIK) is the most popular stock in this table. On the other hand Origin Bancorp, Inc. (NASDAQ:OBNK) is the least popular one with only 6 bullish hedge fund positions. TrustCo Bank Corp NY (NASDAQ:TRST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRST is 80.4. 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. 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. Hedge funds were also right about betting on TRST as the stock returned 23% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.