Were Hedge Funds Right About Triumph Group Inc (TGI)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Triumph Group Inc (NYSE:TGI) and determine whether hedge funds skillfully traded this stock.

Is Triumph Group Inc (NYSE:TGI) an outstanding investment today? Investors who are in the know were becoming more confident. The number of bullish hedge fund bets improved by 2 recently. Our calculations also showed that TGI 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). TGI was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 16 hedge funds in our database with TGI positions at the end of the previous quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeremy Mindich - Scopia Capital

Jeremy Mindich of Scopia Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Triumph Group Inc (NYSE:TGI).

Hedge fund activity in Triumph Group Inc (NYSE:TGI)

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in TGI a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Maple Rock Capital, managed by Len Kipp and Xavier Majic, holds the most valuable position in Triumph Group Inc (NYSE:TGI). Maple Rock Capital has a $16 million position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $8.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish include D. E. Shaw’s D E Shaw, Alexis Michas and John Bartholdson’s Juniper Investment Company and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Maple Rock Capital allocated the biggest weight to Triumph Group Inc (NYSE:TGI), around 4.12% of its 13F portfolio. Juniper Investment Company is also relatively very bullish on the stock, earmarking 3.47 percent of its 13F equity portfolio to TGI.

Now, some big names were leading the bulls’ herd. Maple Rock Capital, managed by Len Kipp and Xavier Majic, assembled the largest position in Triumph Group Inc (NYSE:TGI). Maple Rock Capital had $16 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.1 million investment in the stock during the quarter. The other funds with brand new TGI positions are Matt Sirovich and Jeremy Mindich’s Scopia Capital, Dmitry Balyasny’s Balyasny Asset Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Triumph Group Inc (NYSE:TGI) but similarly valued. These stocks are PDL BioPharma Inc. (NASDAQ:PDLI), MRC Global Inc (NYSE:MRC), Pitney Bowes Inc. (NYSE:PBI), and Valhi, Inc. (NYSE:VHI). All of these stocks’ market caps resemble TGI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PDLI 14 77459 -5
MRC 17 20409 -3
PBI 15 32943 -8
VHI 5 1855 -2
Average 12.75 33167 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $38 million in TGI’s case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Triumph Group Inc (NYSE:TGI) is more popular among hedge funds. 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately TGI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TGI were disappointed as the stock returned 7.1% since the end of the first 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.