Hedge Funds Are Dumping Tredegar Corporation (TG)

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Tredegar Corporation (NYSE:TG) from the perspective of those elite funds.

Is Tredegar Corporation (NYSE:TG) a great investment right now? The stock plunged by over 40% in the third quarter, spooking several investors, who decided to head for the exits. In this way, among the funds we track, TG was in 7 funds’ portfolios at the end of the third quarter of 2015, compared to 9 funds with TG 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 Moneygram International Inc (NYSE:MGI), Crestwood Equity Partners LP (NYSE:CEQP), and pdvWireless Inc (NASDAQ:PDVW) to gather more data points.

In today’s marketplace there are a lot of tools market participants can use to value their holdings. A couple of the less utilized tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the top money managers can outperform the broader indices by a significant amount (see the details here).

Keeping this in mind, we’re going to go over the recent action surrounding Tredegar Corporation (NYSE:TG).

What does the smart money think about Tredegar Corporation (NYSE:TG)?

As mentioned earlier, heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 22% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the biggest position in Tredegar Corporation (NYSE:TG). GAMCO has a $62.3 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $0.8 million position. Other professional money managers that are bullish consist of Israel Englander’s Millennium Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Roger Ibbotson’s Zebra Capital Management.

Judging by the fact that Tredegar Corporation (NYSE:TG) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who were dropping their positions entirely by the end of the third quarter. At the top of the heap, D. E. Shaw’s D E Shaw said goodbye to the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $0.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $0.5 million worth of shares. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Tredegar Corporation (NYSE:TG). We will take a look at Moneygram International Inc (NYSE:MGI), Crestwood Equity Partners LP (NYSE:CEQP), pdvWireless Inc (NASDAQ:PDVW), and Kadant Inc. (NYSE:KAI). This group of stocks’ market caps are closest to TG’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $75 million, compared to $64 million in TG’s case. Kadant Inc. (NYSE:KAI) is the most popular stock in this table, while Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 6 bullish hedge fund positions. Tredegar Corporation (NYSE:TG) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KAI might be a better candidate to consider a long position.