Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Trimble Inc. (NASDAQ:TRMB).
Is Trimble Inc. (NASDAQ:TRMB) worth your attention right now? Money managers are becoming hopeful. The number of bullish hedge fund bets improved by 9 lately. Our calculations also showed that TRMB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TRMB was in 25 hedge funds’ portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with TRMB positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are viewed as worthless, outdated investment tools of yesteryear. While there are more than 8000 funds trading at present, Our experts choose to focus on the upper echelon of this group, around 750 funds. It is estimated that this group of investors manage the majority of all hedge funds’ total capital, and by watching their top stock picks, Insider Monkey has brought to light a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Steven Cohen of Point72 Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action encompassing Trimble Inc. (NASDAQ:TRMB).
Hedge fund activity in Trimble Inc. (NASDAQ:TRMB)
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in TRMB 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.
More specifically, Impax Asset Management was the largest shareholder of Trimble Inc. (NASDAQ:TRMB), with a stake worth $235.5 million reported as of the end of September. Trailing Impax Asset Management was Select Equity Group, which amassed a stake valued at $168.6 million. D E Shaw, Millennium Management, and Point72 Asset Management 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 Harvest Capital Strategies allocated the biggest weight to Trimble Inc. (NASDAQ:TRMB), around 5.27% of its portfolio. Albar Capital is also relatively very bullish on the stock, setting aside 4.59 percent of its 13F equity portfolio to TRMB.
As industrywide interest jumped, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Trimble Inc. (NASDAQ:TRMB). Point72 Asset Management had $10.3 million invested in the company at the end of the quarter. Javier Velazquez’s Albar Capital also initiated a $10 million position during the quarter. The other funds with brand new TRMB positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Marshall and Ian Wace’s Marshall Wace, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Trimble Inc. (NASDAQ:TRMB) but similarly valued. We will take a look at Devon Energy Corp (NYSE:DVN), Erie Indemnity Company (NASDAQ:ERIE), Shaw Communications Inc (NYSE:SJR), and American Financial Group, Inc. (NYSE:AFG). This group of stocks’ market caps resemble TRMB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DVN | 39 | 1275716 | 3 |
| ERIE | 19 | 83890 | 7 |
| SJR | 12 | 270319 | 0 |
| AFG | 24 | 421046 | 2 |
| Average | 23.5 | 512743 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $513 million. That figure was $593 million in TRMB’s case. Devon Energy Corp (NYSE:DVN) is the most popular stock in this table. On the other hand Shaw Communications Inc (NYSE:SJR) is the least popular one with only 12 bullish hedge fund positions. Trimble Inc. (NASDAQ:TRMB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TRMB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TRMB were disappointed as the stock returned 4.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
