Is TT A Good Stock To Buy According To Hedge Funds?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Trane Technologies plc (NYSE:TT) in this article.

Is TT a good stock to buy? Trane Technologies plc (NYSE:TT) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 40. TT has seen a decrease in hedge fund interest recently. There were 40 hedge funds in our database with TT positions at the end of the second quarter. Our calculations also showed that TT 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.

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Brad Farber Atika Capital

Brad Farber of Atika Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 glance at the latest hedge fund action surrounding Trane Technologies plc (NYSE:TT).

Do Hedge Funds Think TT Is A Good Stock To Buy Now?

At the end of September, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TT over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Trane Technologies plc (NYSE:TT) was held by Generation Investment Management, which reported holding $407.7 million worth of stock at the end of September. It was followed by Impax Asset Management with a $129.4 million position. Other investors bullish on the company included Alyeska Investment Group, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to Trane Technologies plc (NYSE:TT), around 2.16% of its 13F portfolio. Iszo Capital is also relatively very bullish on the stock, designating 1.9 percent of its 13F equity portfolio to TT.

Because Trane Technologies plc (NYSE:TT) has witnessed falling interest from the smart money, it’s easy to see that there was a specific group of money managers that decided to sell off their entire stakes heading into Q4. Interestingly, Louis Bacon’s Moore Global Investments dumped the largest position of all the hedgies tracked by Insider Monkey, totaling about $4.2 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Trane Technologies plc (NYSE:TT) but similarly valued. We will take a look at PPG Industries, Inc. (NYSE:PPG), Best Buy Co., Inc. (NYSE:BBY), Match Group, Inc. (NASDAQ:MTCH), Paychex, Inc. (NASDAQ:PAYX), Peloton Interactive, Inc. (NASDAQ:PTON), Eversource Energy (NYSE:ES), and CRH PLC (NYSE:CRH). This group of stocks’ market values are similar to TT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPG 36 230601 0
BBY 40 1195041 7
MTCH 61 2846837 22
PAYX 28 724599 -8
PTON 58 3497757 8
ES 20 308177 -8
CRH 7 61870 0
Average 35.7 1266412 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $1266 million. That figure was $832 million in TT’s case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. Trane Technologies plc (NYSE:TT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TT is 57.5. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on TT as the stock returned 16.8% since the end of Q3 (through 12/18) 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.