Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of TransDigm Group Incorporated (NYSE:TDG).
TransDigm Group Incorporated (NYSE:TDG) has experienced a decrease in support from the world’s most elite money managers recently. TransDigm Group Incorporated (NYSE:TDG) was in 57 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 64. There were 62 hedge funds in our database with TDG positions at the end of the first quarter. Our calculations also showed that TDG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds’ moves today.
Chase Coleman of Tiger Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. Now we’re going to view the recent hedge fund action regarding TransDigm Group Incorporated (NYSE:TDG).
Do Hedge Funds Think TDG Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 57 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TDG over the last 24 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Chase Coleman’s Tiger Global Management LLC has the number one position in TransDigm Group Incorporated (NYSE:TDG), worth close to $1.1374 billion, accounting for 2.1% of its total 13F portfolio. On Tiger Global Management LLC’s heels is Sharlyn C. Heslam of Stockbridge Partners, with a $1.0062 billion position; the fund has 21.4% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Mark Massey’s AltaRock Partners, David Goel and Paul Ferri’s Matrix Capital Management and Snehal Amin’s Windacre Partnership. In terms of the portfolio weights assigned to each position Anabranch Capital allocated the biggest weight to TransDigm Group Incorporated (NYSE:TDG), around 24.6% of its 13F portfolio. AltaRock Partners is also relatively very bullish on the stock, earmarking 22.51 percent of its 13F equity portfolio to TDG.
Judging by the fact that TransDigm Group Incorporated (NYSE:TDG) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of funds who were dropping their entire stakes by the end of the second quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest position of the 750 funds tracked by Insider Monkey, comprising an estimated $72.1 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $11.3 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the second quarter.
Let’s check out 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 Xcel Energy Inc (NASDAQ:XEL), Brown-Forman Corporation (NYSE:BF), Alcon Inc. (NYSE:ALC), Republic Services, Inc. (NYSE:RSG), Otis Worldwide Corporation (NYSE:OTIS), SBA Communications Corporation (NASDAQ:SBAC), and Corning Incorporated (NYSE:GLW). This group of stocks’ market valuations resemble TDG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XEL | 22 | 235410 | 4 |
| BF | 31 | 1667783 | -4 |
| ALC | 22 | 727825 | -1 |
| RSG | 34 | 1289299 | -2 |
| OTIS | 45 | 2406679 | -7 |
| SBAC | 43 | 2156941 | 5 |
| GLW | 42 | 521738 | 10 |
| Average | 34.1 | 1286525 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1287 million. That figure was $7352 million in TDG’s case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand Xcel Energy Inc (NASDAQ:XEL) is the least popular one with only 22 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 76.7. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 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 0.2% since the end of the second quarter (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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
