Hedge Funds Never Been Less Bullish On Trinity Industries, Inc. (TRN)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Trinity Industries, Inc. (NYSE:TRN) based on that data.

Is Trinity Industries, Inc. (NYSE:TRN) undervalued? Investors who are in the know are in a pessimistic mood. The number of long hedge fund bets shrunk by 9 lately. Our calculations also showed that TRN 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). TRN was in 18 hedge funds’ portfolios at the end of March. There were 27 hedge funds in our database with TRN holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Jeffrey Ubben of ValueAct Capital

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 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. Now let’s view the fresh hedge fund action surrounding Trinity Industries, Inc. (NYSE:TRN).

How are hedge funds trading Trinity Industries, Inc. (NYSE:TRN)?

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TRN over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, ValueAct Capital held the most valuable stake in Trinity Industries, Inc. (NYSE:TRN), which was worth $434 million at the end of the third quarter. On the second spot was Omega Advisors which amassed $45.5 million worth of shares. Cardinal Capital, StackLine Partners, and GAMCO Investors 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 StackLine Partners allocated the biggest weight to Trinity Industries, Inc. (NYSE:TRN), around 12.17% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, setting aside 6.23 percent of its 13F equity portfolio to TRN.

Because Trinity Industries, Inc. (NYSE:TRN) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds who sold off their positions entirely heading into Q4. It’s worth mentioning that Eli Samaha’s Madison Avenue Partners said goodbye to the largest position of all the hedgies monitored by Insider Monkey, valued at an estimated $21.4 million in stock, and Robert Bishop’s Impala Asset Management was right behind this move, as the fund sold off about $18.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trinity Industries, Inc. (NYSE:TRN) but similarly valued. We will take a look at Altair Engineering Inc. (NASDAQ:ALTR), Saia Inc (NASDAQ:SAIA), Arcosa, Inc. (NYSE:ACA), and Copa Holdings, S.A. (NYSE:CPA). All of these stocks’ market caps match TRN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $622 million in TRN’s case. Arcosa, Inc. (NYSE:ACA) is the most popular stock in this table. On the other hand Altair Engineering Inc. (NASDAQ:ALTR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Trinity Industries, Inc. (NYSE:TRN) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on TRN as the stock returned 39.4% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.