Hedge Funds Are Coming Back To Trane Technologies plc (TT)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Trane Technologies plc (NYSE:TT)? The smart money sentiment can provide an answer to this question.

Trane Technologies plc (NYSE:TT) has seen an increase in hedge fund interest of late. Trane Technologies plc (NYSE:TT) was in 39 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that TT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s check out the key hedge fund action encompassing Trane Technologies plc (NYSE:TT).

David Blood of Generation Investment Management

Do Hedge Funds Think TT Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2021. By comparison, 37 hedge funds held shares or bullish call options in TT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Impax Asset Management was the largest shareholder of Trane Technologies plc (NYSE:TT), with a stake worth $289.4 million reported as of the end of September. Trailing Impax Asset Management was Generation Investment Management, which amassed a stake valued at $248.7 million. AQR Capital Management, Bridgewater Associates, and Renaissance Technologies 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 Fosse Capital Partners allocated the biggest weight to Trane Technologies plc (NYSE:TT), around 24.13% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 1.68 percent of its 13F equity portfolio to TT.

As one would reasonably expect, key money managers have been driving this bullishness. Renaissance Technologies, initiated the most valuable position in Trane Technologies plc (NYSE:TT). Renaissance Technologies had $56.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $6.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser’s Magnetar Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Mika Toikka’s AlphaCrest Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trane Technologies plc (NYSE:TT) but similarly valued. We will take a look at Digital Realty Trust, Inc. (NYSE:DLR), Walgreens Boots Alliance Inc (NASDAQ:WBA), Pioneer Natural Resources Company (NYSE:PXD), American Electric Power Company, Inc. (NASDAQ:AEP), Prudential Financial Inc (NYSE:PRU), Koninklijke Philips NV (NYSE:PHG), and Paychex, Inc. (NASDAQ:PAYX). This group of stocks’ market caps are closest to TT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $638 million. That figure was $1148 million in TT’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 11 bullish hedge fund positions. Trane Technologies plc (NYSE:TT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TT is 74.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on TT as the stock returned 8.1% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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