Trina Solar Limited (ADR) (NYSE:TSL) stock dropped by more than 10% earlier today following the reports that the company’s partnership with a Malaysian solar panel facility is falling apart. The report suggested that the Malaysian solar panel facility didn’t receive government approval for the deal. Shares have since rebounded slightly, sitting down by 5.66% in late afternoon trading. Investors were rightly worried that this could turn out to be the biggest roadblock for Trina Solar Limited (ADR) (NYSE:TSL)’s expansion plans in Asia, however the company has said that its partnership plans with the Malaysian original equipment manufacturer are on track and tried to assure investors (seemingly to little avail) that its partner will be able to meet its goal to ship 400 MW of solar modules this year. Trina Solar Limited (ADR) (NYSE:TSL)’s stock had gained more than 30% in the first three months of this year, but since June 23 the stock has dropped more than 22% of its value, giving back most of those gains. Could this be the perfect opportunity to enter the stock at a cheaper valuation?
The smart money has certainly liked what it sees in Trina Solar of late. At the end of March, there were 20 hedge funds tracked by Insider Monkey holding long positions in Trina Solar Limited (ADR) (NYSE:TSL)’s stock, with around $270.7 million of shares held by them collectively. That was a significant increase from the 13 hedge funds with around $191.5 million of the stock held at the end of 2014. Even taking into account that Trina Solar Limited (ADR) (NYSE:TSL)’s stock gained around 39% during the same period, we can say that hedge funds were bullish, both adding to their collective holdings, and with several new investors entering at a time when shares were soaring.
Most investors don’t understand hedge funds and indicators that are based on hedge fund and insider activity. They ignore hedge funds because of their recent poor performance in the long-running bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns enjoyed (or not) by investors. We uncovered through extensive research that hedge funds’ long positions in small-cap stocks actually greatly outperformed the market from 1999 to 2012, and built a system around this. The 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 80 percentage points since the end of August 2012 when this system went live, returning a cumulative 135% vs. less than 55% for the S&P 500 Index (read the details).
Likewise, other research (not our own) has shown insider purchases are also effective piggybacking methods for investors that lead to greater returns. That’s why we believe investors should pay attention to what hedge funds and insiders are buying and keep them apprised of this information. There have been no insider purchases or sales made by Trina Solar Limited (ADR) (NYSE:TSL) insiders so far this year.
Taking all of this into account, let us take a look at the recent hedge fund action encompassing Trina Solar Limited (ADR) (NYSE:TSL).
How have hedgies been trading Trina Solar Limited (ADR) (NYSE:TSL)?
Within Insider Monkey’s database, Platinum Asset Management, led by Kerr Neilson, holds the most valuable position in Trina Solar Limited (ADR) (NYSE:TSL). Platinum Asset Management holds around 10.6 million shares valued at $128.5 million at the end of March, comprising 2.6% of its 13F portfolio. Coming in second is Oaktree Capital Management, led by Howard Marks, holding 3.9 million shares; 0.5% of its 13F portfolio is allocated to the company. Other hedgies that hold long positions contain Ian Simm’s Impax Asset Management, Ken Hahn’s Quentec Asset Management, and Steve Cohen’s Point72 Asset Management.
As one would reasonably expect, some big names were breaking ground themselves. Notably, Impax Asset Management, led by Ian Simm, initiated the largest position in Trina Solar Limited (ADR) (NYSE:TSL), buying 3.3 million shares, with the new holding being worth $40.2 million at the end of the first trimester. Steve Cohen’s Point72 Asset Management bought 457,300 shares during the first quarter. Some other funds with new positions in the stock were Louis Bacon’s Moore Global Investments, Joe DiMenna‘s Zweig Dimenna Partners, and Peter Muller’s PDT Partners.
Despite the fact that the number of hedge funds holding long positions in Trina Solar Limited (ADR) (NYSE:TSL)’s stock went up by seven during the first three months of the year, the aggregate capital investment has not increased significantly compared to the overall stock gain during the same period. Despite a slightly bullish hedge fund sentiment in the first quarter, the stock is on the downtrend since the last week of June. We feel we need to see how the hedge fund sentiment has changed in the second quarter before we can recommend this stock at its depreciated price.