Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards TransUnion (NYSE:TRU) to find out whether there were any major changes in hedge funds’ views.
TransUnion (NYSE:TRU) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 47 hedge funds’ portfolios at the end of September. Our calculations also showed that TRU 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as International Paper Company (NYSE:IP), Teleflex Incorporated (NYSE:TFX), and CBRE Group, Inc. (NYSE:CBRE) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are seen as unimportant, outdated investment tools of years past. While there are greater than 8000 funds trading at present, Our experts choose to focus on the bigwigs of this group, around 850 funds. These hedge fund managers watch over the lion’s share of the smart money’s total asset base, and by observing their best equity investments, Insider Monkey has uncovered many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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Do Hedge Funds Think TRU Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 38 hedge funds held shares or bullish call options in TRU a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in TransUnion (NYSE:TRU) was held by Select Equity Group, which reported holding $318.8 million worth of stock at the end of September. It was followed by Palestra Capital Management with a $188.1 million position. Other investors bullish on the company included D E Shaw, Marshall Wace LLP, and Farallon Capital. In terms of the portfolio weights assigned to each position Lansing Management allocated the biggest weight to TransUnion (NYSE:TRU), around 13.55% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, earmarking 6.53 percent of its 13F equity portfolio to TRU.
Because TransUnion (NYSE:TRU) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that slashed their entire stakes heading into Q4. Intriguingly, James Parsons’s Junto Capital Management said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $74.3 million in stock, and Principal Global Investors’s Columbus Circle Investors was right behind this move, as the fund said goodbye to about $35.8 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to TransUnion (NYSE:TRU). We will take a look at International Paper Company (NYSE:IP), Teleflex Incorporated (NYSE:TFX), CBRE Group, Inc. (NYSE:CBRE), Arista Networks Inc (NYSE:ANET), Invitation Homes Inc. (NYSE:INVH), Varian Medical Systems, Inc. (NYSE:VAR), and Ventas, Inc. (NYSE:VTR). This group of stocks’ market values resemble TRU’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 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $768 million. That figure was $1685 million in TRU’s case. Varian Medical Systems, Inc. (NYSE:VAR) is the most popular stock in this table. On the other hand Ventas, Inc. (NYSE:VTR) is the least popular one with only 17 bullish hedge fund positions. TransUnion (NYSE:TRU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRU is 77.9. 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 TRU as the stock returned 15.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.