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Were Hedge Funds Right About Selling TriMas Corp (TRS)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards TriMas Corp (NASDAQ:TRS) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is TriMas Corp (NASDAQ:TRS) an attractive stock to buy now? Hedge funds were taking a pessimistic view. The number of bullish hedge fund positions were cut by 2 in recent months. Our calculations also showed that TRS 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). TRS was in 13 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with TRS holdings at the end of the previous quarter.

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

According to most stock holders, hedge funds are seen as slow, old investment tools of years past. While there are over 8000 funds trading today, Our experts choose to focus on the crème de la crème of this club, about 850 funds. These hedge fund managers control the majority of all hedge funds’ total asset base, and by monitoring their best investments, Insider Monkey has brought to light a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment 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 15 largest gold producing countries 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 review the key hedge fund action surrounding TriMas Corp (NASDAQ:TRS).

What have hedge funds been doing with TriMas Corp (NASDAQ:TRS)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in TRS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Pzena Investment Management held the most valuable stake in TriMas Corp (NASDAQ:TRS), which was worth $29.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $13.3 million worth of shares. Millennium Management, Diamond Hill Capital, and Royce & Associates 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 Barington Capital Group allocated the biggest weight to TriMas Corp (NASDAQ:TRS), around 2.56% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.67 percent of its 13F equity portfolio to TRS.

Because TriMas Corp (NASDAQ:TRS) has experienced a decline in interest from the smart money, we can see that there is a sect of hedge funds that slashed their full holdings heading into Q4. It’s worth mentioning that Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $0.3 million in stock, and Frederick DiSanto’s Ancora Advisors was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to TriMas Corp (NASDAQ:TRS). These stocks are Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), Kornit Digital Ltd. (NASDAQ:KRNT), Eldorado Gold Corp (NYSE:EGO), and Enanta Pharmaceuticals Inc (NASDAQ:ENTA). This group of stocks’ market caps are closest to TRS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MDGL 15 270102 -4
KRNT 9 28349 -3
EGO 14 137122 1
ENTA 18 217411 -3
Average 14 163246 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $72 million in TRS’s case. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the most popular stock in this table. On the other hand Kornit Digital Ltd. (NASDAQ:KRNT) is the least popular one with only 9 bullish hedge fund positions. TriMas Corp (NASDAQ:TRS) 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately TRS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TRS investors were disappointed as the stock returned -2% during the second quarter 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.

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