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 TransDigm Group Incorporated (NYSE:TDG) to find out whether there were any major changes in hedge funds’ views.
Is TransDigm Group Incorporated (NYSE:TDG) going to take off soon? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets improved by 6 recently. TransDigm Group Incorporated (NYSE:TDG) was in 63 hedge funds’ portfolios at the end of September. The all time high for this statistic is 64. Our calculations also showed that TDG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 57 hedge funds in our database with TDG holdings at the end of June.
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. Now we’re going to view the key hedge fund action surrounding TransDigm Group Incorporated (NYSE:TDG).
Chase Coleman of Tiger Global
Do Hedge Funds Think TDG Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2021. By comparison, 64 hedge funds held shares or bullish call options in TDG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Chase Coleman’s Tiger Global Management LLC has the largest position in TransDigm Group Incorporated (NYSE:TDG), worth close to $1.0975 billion, accounting for 2.1% of its total 13F portfolio. Coming in second is Stockbridge Partners, managed by Sharlyn C. Heslam, which holds a $970.9 million position; 20% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Mark Massey’s AltaRock Partners, David Goel and Paul Ferri’s Matrix Capital Management and Lone Pine Capital. In terms of the portfolio weights assigned to each position AltaRock Partners allocated the biggest weight to TransDigm Group Incorporated (NYSE:TDG), around 22.34% of its 13F portfolio. Anabranch Capital is also relatively very bullish on the stock, setting aside 20.94 percent of its 13F equity portfolio to TDG.
As one would reasonably expect, some big names were leading the bulls’ herd. Junto Capital Management, managed by James Parsons, established the most valuable position in TransDigm Group Incorporated (NYSE:TDG). Junto Capital Management had $63.4 million invested in the company at the end of the quarter. Kevin D. Eng’s Columbus Hill Capital Management also initiated a $10.5 million position during the quarter. The other funds with new positions in the stock are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Paul Tudor Jones’s Tudor Investment Corp, and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TransDigm Group Incorporated (NYSE:TDG) but similarly valued. We will take a look at Rockwell Automation Inc. (NYSE:ROK), First Republic Bank (NYSE:FRC), International Flavors & Fragrances Inc (NYSE:IFF), CoStar Group Inc (NASDAQ:CSGP), PPG Industries, Inc. (NYSE:PPG), BeiGene, Ltd. (NASDAQ:BGNE), and Xcel Energy Inc (NASDAQ:XEL). This group of stocks’ market valuations are similar to TDG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROK | 29 | 519693 | 4 |
| FRC | 35 | 918312 | 1 |
| IFF | 46 | 2838241 | -6 |
| CSGP | 29 | 2585035 | -20 |
| PPG | 30 | 318414 | 4 |
| BGNE | 16 | 6418381 | -5 |
| XEL | 26 | 498007 | 4 |
| Average | 30.1 | 2013726 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $2014 million. That figure was $7189 million in TDG’s case. International Flavors & Fragrances Inc (NYSE:IFF) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks TransDigm Group Incorporated (NYSE:TDG) is more popular among hedge funds. Our overall hedge fund sentiment score for TDG is 89.5. 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. Unfortunately TDG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TDG were disappointed as the stock returned -7.4% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
