Do Hedge Funds Love Thomson Reuters Corporation (USA) (TRI)?

Hedge funds and other investment firms that we track, manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Thomson Reuters Corporation (USA) (NYSE:TRI) was in 12 hedge funds’ portfolios at the end of September. TRI shareholders have witnessed a decrease in hedge fund sentiment of late. There were 17 hedge funds in our database with TRI holdings at the end of the previous quarter. 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 Broadcom Corporation (NASDAQ:BRCM), Travelers Companies Inc (NYSE:TRV), and Brookfield Asset Management Inc. (USA) (NYSE:BAM) to gather more data points.

According to most traders, hedge funds are perceived as slow, outdated financial tools of years past. While there are greater than an 8000 funds with their doors open at the moment, Our experts look at the moguls of this club, around 700 funds. These money managers oversee bulk of the hedge fund industry’s total capital, and by following their top picks, Insider Monkey has figured out a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, we’re going to check out the recent action surrounding Thomson Reuters Corporation (USA) (NYSE:TRI).

Hedge fund activity in Thomson Reuters Corporation (USA) (NYSE:TRI)

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a fall of 29% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Tetrem Capital Management, managed by Daniel Bubis, holds the number one position in Thomson Reuters Corporation (USA) (NYSE:TRI), worth an estimated $100.9 million and comprising 3.4% of its 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $52.3 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions consist of Cliff Asness’s AQR Capital Management, Clint Carlson’s Carlson Capital and David Forster and Peter Wilton’s IBIS Capital Partners.

Since Thomson Reuters Corporation (USA) (NYSE:TRI) has faced falling interest from the smart money, logic holds that there is a sect of hedge funds that elected to cut their full holdings by the end of the third quarter. Interestingly, D. E. Shaw’s D E Shaw dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $7.4 million in stock. Ray Carroll’s fund, Breton Hill Capital, also dropped its investment, about $6.5 million worth of shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Thomson Reuters Corporation (USA) (NYSE:TRI) but similarly valued. These stocks are Broadcom Corporation (NASDAQ:BRCM), Travelers Companies Inc (NYSE:TRV), Brookfield Asset Management Inc. (USA) (NYSE:BAM), and Sony Corporation (ADR) (NYSE:SNE). This group of stocks’ market valuations are closest to TRI’s market valuation.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $2.29 billion. That figure was $242 million in TRI’s case. Broadcom Corporation (NASDAQ:BRCM) is leading the pack, while Sony Corporation (ADR) (NYSE:SNE) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Thomson Reuters Corporation (USA) (NYSE:TRI) is even less popular than SNE. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.