We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 years and analyze what the smart money thinks of Tennant Company (NYSE:TNC) based on that data.
Tennant Company (NYSE:TNC) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of December. 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 Safety Insurance Group, Inc. (NASDAQ:SAFT), American Finance Trust, Inc. (NASDAQ:AFIN), and TriMas Corp (NASDAQ:TRS) to gather more data points. Our calculations also showed that TNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Tennant Company (NYSE:TNC).
How are hedge funds trading Tennant Company (NYSE:TNC)?
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in TNC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Tennant Company (NYSE:TNC), with a stake worth $76.7 million reported as of the end of September. Trailing Royce & Associates was GAMCO Investors, which amassed a stake valued at $24.9 million. Millennium Management, Citadel Investment Group, and Ancora Advisors 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 Tennant Company (NYSE:TNC), around 0.69% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to TNC.
Seeing as Tennant Company (NYSE:TNC) has experienced falling interest from the smart money, we can see that there is a sect of money managers that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Mark Coe’s Intrinsic Edge Capital sold off the largest stake of the 750 funds followed by Insider Monkey, totaling about $3.7 million in stock. Ken Grossman and Glen Schneider’s fund, SG Capital Management, also sold off its stock, about $2.3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Tennant Company (NYSE:TNC). These stocks are Safety Insurance Group, Inc. (NASDAQ:SAFT), American Finance Trust, Inc. (NASDAQ:AFIN), TriMas Corp (NASDAQ:TRS), and Victory Capital Holdings, Inc. (NASDAQ:VCTR). This group of stocks’ market caps match TNC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAFT | 15 | 47499 | 5 |
| AFIN | 8 | 25024 | -1 |
| TRS | 15 | 113854 | 0 |
| VCTR | 7 | 73385 | -5 |
| Average | 11.25 | 64941 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $110 million in TNC’s case. Safety Insurance Group, Inc. (NASDAQ:SAFT) is the most popular stock in this table. On the other hand Victory Capital Holdings, Inc. (NASDAQ:VCTR) is the least popular one with only 7 bullish hedge fund positions. Tennant Company (NYSE:TNC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately TNC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TNC investors were disappointed as the stock returned -24.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
