How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Twin River Worldwide Holdings Inc. (NYSE:TRWH) and determine whether hedge funds had an edge regarding this stock.
Twin River Worldwide Holdings Inc. (NYSE:TRWH) shareholders have witnessed an increase in enthusiasm from smart money of late. Twin River Worldwide Holdings Inc. (NYSE:TRWH) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 13 hedge funds in our database with TRWH holdings at the end of March. Our calculations also showed that TRWH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Reeder of PAR Capital Management
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s view the new hedge fund action encompassing Twin River Worldwide Holdings Inc. (NYSE:TRWH).
How are hedge funds trading Twin River Worldwide Holdings Inc. (NYSE:TRWH)?
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in TRWH over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, PAR Capital Management held the most valuable stake in Twin River Worldwide Holdings Inc. (NYSE:TRWH), which was worth $61.3 million at the end of the third quarter. On the second spot was HG Vora Capital Management which amassed $53.5 million worth of shares. Solus Alternative Asset Management, Newtyn Management, and Driehaus Capital 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 Stormborn Capital Management allocated the biggest weight to Twin River Worldwide Holdings Inc. (NYSE:TRWH), around 5.77% of its 13F portfolio. Solus Alternative Asset Management is also relatively very bullish on the stock, dishing out 5.1 percent of its 13F equity portfolio to TRWH.
As industrywide interest jumped, specific money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, assembled the biggest position in Twin River Worldwide Holdings Inc. (NYSE:TRWH). Driehaus Capital had $7 million invested in the company at the end of the quarter. Elise Di Vincenzo Crumbine’s Stormborn Capital Management also initiated a $5 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Brandon Osten’s Venator Capital Management.
Let’s check out hedge fund activity in other stocks similar to Twin River Worldwide Holdings Inc. (NYSE:TRWH). We will take a look at Solar Capital Ltd. (NASDAQ:SLRC), Geron Corporation (NASDAQ:GERN), Trillium Therapeutics Inc. (NASDAQ:TRIL), Delek Logistics Partners LP (NYSE:DKL), Foundation Building Materials, Inc. (NYSE:FBM), Codexis, Inc. (NASDAQ:CDXS), and Kosmos Energy Ltd (NYSE:KOS). All of these stocks’ market caps resemble TRWH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLRC | 12 | 28221 | -3 |
| GERN | 11 | 181717 | 8 |
| TRIL | 25 | 216434 | 0 |
| DKL | 1 | 2414 | 0 |
| FBM | 9 | 71737 | -3 |
| CDXS | 13 | 152342 | 5 |
| KOS | 12 | 33395 | -9 |
| Average | 11.9 | 98037 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $157 million in TRWH’s case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. Twin River Worldwide Holdings Inc. (NYSE:TRWH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRWH is 75.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on TRWH as the stock returned 17.9% during Q3 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.
