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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Trustmark Corp (NASDAQ:TRMK).
Trustmark Corp (NASDAQ:TRMK) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. TRMK was in 16 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with TRMK positions at the end of the previous quarter. Our calculations also showed that TRMK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the key hedge fund action regarding Trustmark Corp (NASDAQ:TRMK).
What does smart money think about Trustmark Corp (NASDAQ:TRMK)?
At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in TRMK a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Trustmark Corp (NASDAQ:TRMK), worth close to $5.2 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which holds a $1.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Sciencast Management allocated the biggest weight to Trustmark Corp (NASDAQ:TRMK), around 0.12% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to TRMK.
As aggregate interest increased, specific money managers have jumped into Trustmark Corp (NASDAQ:TRMK) headfirst. Winton Capital Management, managed by David Harding, created the most valuable position in Trustmark Corp (NASDAQ:TRMK). Winton Capital Management had $1.7 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Trustmark Corp (NASDAQ:TRMK). We will take a look at eHealth, Inc. (NASDAQ:EHTH), DiamondRock Hospitality Company (NYSE:DRH), Genworth Financial Inc (NYSE:GNW), and Crestwood Equity Partners LP (NYSE:CEQP). This group of stocks’ market caps resemble TRMK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EHTH | 26 | 458734 | 4 |
| DRH | 17 | 72890 | -1 |
| GNW | 32 | 278398 | 3 |
| CEQP | 6 | 16286 | -1 |
| Average | 20.25 | 206577 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $19 million in TRMK’s case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 6 bullish hedge fund positions. Trustmark Corp (NASDAQ:TRMK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately TRMK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TRMK investors were disappointed as the stock returned -31.3% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
