We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Titan Machinery Inc. (NASDAQ:TITN).
Is Titan Machinery Inc. (NASDAQ:TITN) a buy right now? Hedge funds are buying. The number of bullish hedge fund positions rose by 6 lately. Our calculations also showed that TITN isn’t among the 30 most popular stocks among hedge funds (see the video below). TITN was in 18 hedge funds’ portfolios at the end of the second quarter of 2019. There were 12 hedge funds in our database with TITN holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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. 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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the recent hedge fund action encompassing Titan Machinery Inc. (NASDAQ:TITN).
What does smart money think about Titan Machinery Inc. (NASDAQ:TITN)?
At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TITN over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Titan Machinery Inc. (NASDAQ:TITN) was held by Rutabaga Capital Management, which reported holding $6.5 million worth of stock at the end of March. It was followed by Driehaus Capital with a $6 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Renaissance Technologies.
As industrywide interest jumped, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, established the most outsized position in Titan Machinery Inc. (NASDAQ:TITN). Driehaus Capital had $6 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.5 million position during the quarter. The other funds with brand new TITN positions are Peter Muller’s PDT Partners, Ken Grossman and Glen Schneider’s SG Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s go over hedge fund activity in other stocks similar to Titan Machinery Inc. (NASDAQ:TITN). We will take a look at Duluth Holdings Inc. (NASDAQ:DLTH), SIGA Technologies Inc. (NASDAQ:SIGA), Magic Software Enterprises Ltd. (NASDAQ:MGIC), and AudioCodes Ltd. (NASDAQ:AUDC). This group of stocks’ market valuations match TITN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLTH | 10 | 18575 | -2 |
| SIGA | 10 | 27706 | -6 |
| MGIC | 3 | 4820 | 1 |
| AUDC | 11 | 18594 | -3 |
| Average | 8.5 | 17424 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $33 million in TITN’s case. AudioCodes Ltd. (NASDAQ:AUDC) is the most popular stock in this table. On the other hand Magic Software Enterprises Ltd. (NASDAQ:MGIC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Titan Machinery Inc. (NASDAQ:TITN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TITN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TITN were disappointed as the stock returned -30.3% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
