In this article we are going to use hedge fund sentiment as a tool and determine whether TPG RE Finance Trust, Inc. (NYSE:TRTX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
TPG RE Finance Trust, Inc. (NYSE:TRTX) shareholders have witnessed an increase in enthusiasm from smart money of late. TPG RE Finance Trust, Inc. (NYSE:TRTX) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 17. There were 8 hedge funds in our database with TRTX positions at the end of the first quarter. Our calculations also showed that TRTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. 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. 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 homepage. With all of this in mind we’re going to go over the fresh hedge fund action surrounding TPG RE Finance Trust, Inc. (NYSE:TRTX).
Do Hedge Funds Think TRTX Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the first quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in TRTX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steve Pei’s Gratia Capital has the number one position in TPG RE Finance Trust, Inc. (NYSE:TRTX), worth close to $8.7 million, amounting to 9.7% of its total 13F portfolio. On Gratia Capital’s heels is Dmitry Balyasny of Balyasny Asset Management, with a $7.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Gratia Capital allocated the biggest weight to TPG RE Finance Trust, Inc. (NYSE:TRTX), around 9.73% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to TRTX.
As aggregate interest increased, some big names have jumped into TPG RE Finance Trust, Inc. (NYSE:TRTX) headfirst. ExodusPoint Capital, managed by Michael Gelband, assembled the largest position in TPG RE Finance Trust, Inc. (NYSE:TRTX). ExodusPoint Capital had $0.6 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TPG RE Finance Trust, Inc. (NYSE:TRTX) but similarly valued. We will take a look at SI-BONE, Inc. (NASDAQ:SIBN), So-Young International Inc. (NASDAQ:SY), Fortuna Silver Mines Inc. (NYSE:FSM), OneSpan Inc. (NASDAQ:OSPN), Endeavour Silver Corp. (NYSE:EXK), Forestar Group Inc. (NYSE:FOR), and Humanigen, Inc. (NASDAQ:HGEN). This group of stocks’ market valuations resemble TRTX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIBN | 28 | 202365 | 2 |
| SY | 5 | 14330 | -1 |
| FSM | 14 | 21601 | 2 |
| OSPN | 10 | 156729 | -5 |
| EXK | 8 | 6435 | -2 |
| FOR | 14 | 124439 | 0 |
| HGEN | 11 | 181435 | 0 |
| Average | 12.9 | 101048 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $32 million in TRTX’s case. SI-BONE, Inc. (NASDAQ:SIBN) is the most popular stock in this table. On the other hand So-Young International Inc. (NASDAQ:SY) is the least popular one with only 5 bullish hedge fund positions. TPG RE Finance Trust, Inc. (NYSE:TRTX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TRTX is 35.5. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately TRTX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TRTX investors were disappointed as the stock returned -3.3% since the end of June (through 9/27) 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 in 2021.
Follow Tpg Re Finance Trust Inc. (NYSE:TRTX)
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Disclosure: None. This article was originally published at Insider Monkey.
