In this article you are going to find out whether hedge funds think Trinity Industries, Inc. (NYSE:TRN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Trinity Industries, Inc. (NYSE:TRN) going to take off soon? Hedge funds were in a pessimistic mood. The number of bullish hedge fund bets shrunk by 8 in recent months. Trinity Industries, Inc. (NYSE:TRN) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 33. Our calculations also showed that TRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 28 hedge funds in our database with TRN holdings at the end of March.
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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Leon Cooperman of Omega Advisors
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Do Hedge Funds Think TRN Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in TRN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Trinity Industries, Inc. (NYSE:TRN) was held by ValueAct Capital, which reported holding $403.5 million worth of stock at the end of June. It was followed by Cardinal Capital with a $55.4 million position. Other investors bullish on the company included Omega Advisors, StackLine Partners, and GAMCO Investors. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to Trinity Industries, Inc. (NYSE:TRN), around 11.05% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, setting aside 4.82 percent of its 13F equity portfolio to TRN.
Due to the fact that Trinity Industries, Inc. (NYSE:TRN) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies who were dropping their positions entirely by the end of the second quarter. At the top of the heap, Frank Fu’s CaaS Capital cut the largest position of the 750 funds tracked by Insider Monkey, valued at close to $30 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $22.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Trinity Industries, Inc. (NYSE:TRN). These stocks are Energizer Holdings, Inc. (NYSE:ENR), American States Water Co (NYSE:AWR), Sprouts Farmers Market Inc (NASDAQ:SFM), Verint Systems Inc. (NASDAQ:VRNT), NanoString Technologies Inc (NASDAQ:NSTG), Viper Energy Partners LP (NASDAQ:VNOM), and Old National Bancorp (NYSE:ONB). This group of stocks’ market valuations are similar to TRN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENR | 17 | 209102 | -5 |
| AWR | 14 | 47916 | 0 |
| SFM | 25 | 245919 | 4 |
| VRNT | 30 | 629961 | 4 |
| NSTG | 25 | 773889 | 0 |
| VNOM | 12 | 93531 | 2 |
| ONB | 15 | 47746 | -2 |
| Average | 19.7 | 292581 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $293 million. That figure was $637 million in TRN’s case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 12 bullish hedge fund positions. Trinity Industries, Inc. (NYSE:TRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRN is 37.4. 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 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on TRN as the stock returned 12% since the end of Q2 (through 10/22) 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.
