Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Tenaris S.A. (NYSE:TS) to find out whether there were any major changes in hedge funds’ views.
Tenaris S.A. (NYSE:TS) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September. Our calculations also showed that TS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Aluminum Corp. of China Limited (NYSE:ACH), Ares Management Corp (NYSE:ARES), and Polaris Inc. (NYSE:PII) to gather more data points.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s review the latest hedge fund action regarding Tenaris S.A. (NYSE:TS).
Do Hedge Funds Think TS Is A Good Stock To Buy Now?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in TS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Tenaris S.A. (NYSE:TS), which was worth $110 million at the end of the third quarter. On the second spot was D E Shaw which amassed $7.4 million worth of shares. Millennium Management, SIR Capital Management, and PEAK6 Capital Management 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 SIR Capital Management allocated the biggest weight to Tenaris S.A. (NYSE:TS), around 0.88% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to TS.
Judging by the fact that Tenaris S.A. (NYSE:TS) has faced a decline in interest from the smart money, we can see that there is a sect of funds who sold off their entire stakes last quarter. Interestingly, Steve Cohen’s Point72 Asset Management sold off the biggest investment of all the hedgies followed by Insider Monkey, valued at about $14.9 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also cut its stock, about $11.1 million worth. These transactions are interesting, 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 Tenaris S.A. (NYSE:TS) but similarly valued. These stocks are Aluminum Corp. of China Limited (NYSE:ACH), Ares Management Corp (NYSE:ARES), Polaris Inc. (NYSE:PII), Stericycle Inc (NASDAQ:SRCL), Axon Enterprise, Inc. (NASDAQ:AAXN), Columbia Sportswear Company (NASDAQ:COLM), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market values are similar to TS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $132 million in TS’s case. Polaris Inc. (NYSE:PII) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. Tenaris S.A. (NYSE:TS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TS is 34.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TS as the stock returned 70.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.