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Should You Avoid TPI Composites, Inc. (TPIC)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of TPI Composites, Inc. (NASDAQ:TPIC) based on that data and determine whether they were really smart about the stock.

TPI Composites, Inc. (NASDAQ:TPIC) was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. TPIC has seen a decrease in enthusiasm from smart money recently. There were 20 hedge funds in our database with TPIC positions at the end of the previous quarter. Our calculations also showed that TPIC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To the average investor there are plenty of metrics market participants employ to value stocks. A pair of the less utilized metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top money managers can outperform their index-focused peers by a superb margin (see the details here).

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding TPI Composites, Inc. (NASDAQ:TPIC).

What does smart money think about TPI Composites, Inc. (NASDAQ:TPIC)?

Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TPIC over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is TPIC A Good Stock To Buy?

The largest stake in TPI Composites, Inc. (NASDAQ:TPIC) was held by Redwood Capital Management, which reported holding $14.5 million worth of stock at the end of September. It was followed by Parian Global Management with a $14.2 million position. Other investors bullish on the company included Driehaus Capital, Citadel Investment Group, and Electron Capital Partners. In terms of the portfolio weights assigned to each position Parian Global Management allocated the biggest weight to TPI Composites, Inc. (NASDAQ:TPIC), around 5.02% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, earmarking 2.65 percent of its 13F equity portfolio to TPIC.

Because TPI Composites, Inc. (NASDAQ:TPIC) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their full holdings by the end of the first quarter. It’s worth mentioning that Till Bechtolsheimer’s Arosa Capital Management said goodbye to the largest position of the 750 funds monitored by Insider Monkey, valued at an estimated $5 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $3.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 7 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to TPI Composites, Inc. (NASDAQ:TPIC). These stocks are ARMOUR Residential REIT, Inc. (NYSE:ARR), Niu Technologies (NASDAQ:NIU), Conduent Incorporated (NYSE:CNDT), and trivago N.V. (NASDAQ:TRVG). This group of stocks’ market caps are closest to TPIC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARR 10 15497 -1
NIU 5 31244 0
CNDT 18 167125 -8
TRVG 7 46090 -2
Average 10 64989 -2.75

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 $65 million. That figure was $48 million in TPIC’s case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Niu Technologies (NASDAQ:NIU) is the least popular one with only 5 bullish hedge fund positions. TPI Composites, Inc. (NASDAQ:TPIC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on TPIC as the stock returned 49.3% in Q2 (through June 25th) 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.