Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 TransCanada Corporation (NYSE:TRP).
Is TransCanada Corporation (NYSE:TRP) the right investment to pursue these days? Money managers are getting more bullish. The number of bullish hedge fund bets increased by 2 in recent months. Our calculations also showed that TRP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are many methods investors can use to value publicly traded companies. Two of the most underrated methods are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the market by a very impressive margin (see the details here).
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s take a glance at the recent hedge fund action encompassing TransCanada Corporation (NYSE:TRP).
What does smart money think about TransCanada Corporation (NYSE:TRP)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in TRP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of TransCanada Corporation (NYSE:TRP), with a stake worth $64.7 million reported as of the end of September. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $33.8 million. SIR Capital Management, Heathbridge Capital Management, and Bridgewater Associates 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 Heathbridge Capital Management allocated the biggest weight to TransCanada Corporation (NYSE:TRP), around 6.06% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 5.83 percent of its 13F equity portfolio to TRP.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Centenus Global Management, managed by Sara Nainzadeh, created the biggest position in TransCanada Corporation (NYSE:TRP). Centenus Global Management had $3.2 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.8 million position during the quarter. The other funds with brand new TRP positions are George Zweig, Shane Haas and Ravi Chander’s Signition LP, Alec Litowitz and Ross Laser’s Magnetar Capital, and Frederick DiSanto’s Ancora Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TransCanada Corporation (NYSE:TRP) but similarly valued. These stocks are Equinix Inc (NASDAQ:EQIX), Honda Motor Co Ltd (NYSE:HMC), Prudential Public Limited Company (NYSE:PUK), and Bank of Montreal (NYSE:BMO). This group of stocks’ market values resemble TRP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQIX | 43 | 1639342 | 3 |
| HMC | 9 | 148249 | -2 |
| PUK | 6 | 47203 | -6 |
| BMO | 13 | 224601 | -2 |
| Average | 17.75 | 514849 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $515 million. That figure was $210 million in TRP’s case. Equinix Inc (NASDAQ:EQIX) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 6 bullish hedge fund positions. TransCanada Corporation (NYSE:TRP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. Hedge funds were also right about betting on TRP, though not to the same extent, as the stock returned -13.9% during the first two months of 2020 (through March 11th) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
