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Were Hedge Funds Right About Dumping Transenterix Inc (TRXC) ?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Transenterix Inc (NYSE:TRXC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Transenterix Inc (NYSE:TRXC) going to take off soon? The best stock pickers are getting less optimistic. The number of long hedge fund positions decreased by 6 lately. Our calculations also showed that trxc isn’t among the 30 most popular stocks among hedge funds. TRXC was in 8 hedge funds’ portfolios at the end of December. There were 14 hedge funds in our database with TRXC holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

Let’s view the fresh hedge fund action encompassing Transenterix Inc (NYSE:TRXC).

What have hedge funds been doing with Transenterix Inc (NYSE:TRXC)?

At the end of the fourth quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -43% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in TRXC a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

No of Hedge Funds with TRXC Positions

Among these funds, Aisling Capital held the most valuable stake in Transenterix Inc (NYSE:TRXC), which was worth $5.4 million at the end of the fourth quarter. On the second spot was Masters Capital Management which amassed $4 million worth of shares. Moreover, Balyasny Asset Management, Citadel Investment Group, and OZ Management were also bullish on Transenterix Inc (NYSE:TRXC), allocating a large percentage of their portfolios to this stock.

Due to the fact that Transenterix Inc (NYSE:TRXC) has experienced declining sentiment from hedge fund managers, logic holds that there is a sect of hedgies that slashed their full holdings by the end of the third quarter. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, worth about $2 million in stock. D. E. Shaw’s fund, D E Shaw, also dropped its stock, about $1.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Transenterix Inc (NYSE:TRXC). We will take a look at Forty Seven, Inc. (NASDAQ:FTSV), Whitestone REIT (NYSE:WSR), Matrix Service Co (NASDAQ:MTRX), and RISE Education Cayman Ltd (NASDAQ:REDU). All of these stocks’ market caps are closest to TRXC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTSV 6 23618 -1
WSR 6 15615 3
MTRX 19 46462 7
REDU 4 8795 -1
Average 8.75 23623 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $11 million in TRXC’s case. Matrix Service Co (NASDAQ:MTRX) is the most popular stock in this table. On the other hand RISE Education Cayman Ltd (NASDAQ:REDU) is the least popular one with only 4 bullish hedge fund positions. Transenterix Inc (NYSE:TRXC) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TRXC wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TRXC investors were disappointed as the stock returned -8.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

Disclosure: None. This article was originally published at Insider Monkey.

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