In this article we will check out the progression of hedge fund sentiment towards TransUnion (NYSE:TRU) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
TransUnion (NYSE:TRU) has seen an increase in hedge fund sentiment lately. Our calculations also showed that TRU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding TransUnion (NYSE:TRU).
What does smart money think about TransUnion (NYSE:TRU)?
At the end of the first quarter, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TRU over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TransUnion (NYSE:TRU) was held by Citadel Investment Group, which reported holding $180.2 million worth of stock at the end of September. It was followed by Farallon Capital with a $133.9 million position. Other investors bullish on the company included D E Shaw, Marshall Wace LLP, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Lansing Management allocated the biggest weight to TransUnion (NYSE:TRU), around 17.69% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, dishing out 5.21 percent of its 13F equity portfolio to TRU.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Bloom Tree Partners, managed by Alok Agrawal, assembled the biggest position in TransUnion (NYSE:TRU). Bloom Tree Partners had $30.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $28.4 million position during the quarter. The other funds with brand new TRU positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Anand Parekh’s Alyeska Investment Group, and Mikal Patel’s Oribel Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as TransUnion (NYSE:TRU) but similarly valued. These stocks are Evergy, Inc. (NYSE:EVRG), D.R. Horton, Inc. (NYSE:DHI), Western Digital Corporation (NASDAQ:WDC), and Extra Space Storage, Inc. (NYSE:EXR). All of these stocks’ market caps resemble TRU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVRG | 30 | 757141 | 5 |
| DHI | 65 | 1265515 | 14 |
| WDC | 45 | 560147 | -4 |
| EXR | 16 | 186130 | -12 |
| Average | 39 | 692233 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $692 million. That figure was $895 million in TRU’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Extra Space Storage, Inc. (NYSE:EXR) is the least popular one with only 16 bullish hedge fund positions. TransUnion (NYSE:TRU) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on TRU as the stock returned 21.7% in Q2 (through May 22nd) 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.
