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Trupanion Inc (TRUP): Hedge Funds In Wait-and-See Mode

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Trupanion Inc (NYSE:TRUP) and determine whether hedge funds had an edge regarding this stock.

Trupanion Inc (NYSE:TRUP) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare TRUP to other stocks including Covetrus, Inc. (NASDAQ:CVET), TriCo Bancshares (NASDAQ:TCBK), and First Commonwealth Financial (NYSE:FCF) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are many methods shareholders can use to analyze their holdings. A couple of the most innovative methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outpace their index-focused peers by a healthy margin (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 13 largest cobalt producing countries to identify emerging trends that are likely to lead to 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 fresh hedge fund action regarding Trupanion Inc (NYSE:TRUP).

How are hedge funds trading Trupanion Inc (NYSE:TRUP)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TRUP over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TRUP A Good Stock To Buy?

The largest stake in Trupanion Inc (NYSE:TRUP) was held by Nine Ten Partners, which reported holding $81 million worth of stock at the end of September. It was followed by Greenlea Lane Capital with a $20.7 million position. Other investors bullish on the company included StackLine Partners, Royce & Associates, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Trupanion Inc (NYSE:TRUP), around 32.3% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, designating 13.61 percent of its 13F equity portfolio to TRUP.

Since Trupanion Inc (NYSE:TRUP) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that slashed their positions entirely by the end of the first quarter. At the top of the heap, John Khabbaz’s Phoenician Capital said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth about $4.9 million in stock, and Frank Slattery’s Symmetry Peak Management was right behind this move, as the fund sold off about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trupanion Inc (NYSE:TRUP) but similarly valued. These stocks are Covetrus, Inc. (NASDAQ:CVET), TriCo Bancshares (NASDAQ:TCBK), First Commonwealth Financial (NYSE:FCF), and Enviva Partners, LP (NYSE:EVA). This group of stocks’ market valuations are closest to TRUP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVET 22 114918 2
TCBK 10 30127 -1
FCF 11 22141 -4
EVA 5 86460 0
Average 12 63412 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $141 million in TRUP’s case. Covetrus, Inc. (NASDAQ:CVET) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 5 bullish hedge fund positions. Trupanion Inc (NYSE:TRUP) 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 TRUP as the stock returned 64.2% 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.