While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Timkensteel Corporation (NYSE:TMST).
Is Timkensteel Corporation (NYSE:TMST) a buy right now? Hedge funds are becoming less hopeful. The number of bullish hedge fund bets fell by 2 in recent months. Our calculations also showed that TMST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TMST was in 14 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with TMST positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are plenty of gauges shareholders can use to value stocks. A pair of the most underrated gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can trounce the broader indices by a healthy margin (see the details here).
Jonathan Barrett of Luminus Management
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the latest hedge fund action regarding Timkensteel Corporation (NYSE:TMST).
How are hedge funds trading Timkensteel Corporation (NYSE:TMST)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TMST over the last 17 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Luminus Management, managed by Jonathan Barrett and Paul Segal, holds the most valuable position in Timkensteel Corporation (NYSE:TMST). Luminus Management has a $18.5 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which holds a $9.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of David E. Shaw’s D E Shaw, Chuck Royce’s Royce & Associates and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Timkensteel Corporation (NYSE:TMST), around 0.54% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to TMST.
Because Timkensteel Corporation (NYSE:TMST) has witnessed falling interest from the smart money, it’s safe to say that there exists a select few money managers that decided to sell off their full holdings last quarter. At the top of the heap, Larry Foley and Paul Farrell’s Bronson Point Partners sold off the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $1.4 million in stock. David Harding’s fund, Winton Capital Management, also dropped its stock, about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Timkensteel Corporation (NYSE:TMST) but similarly valued. We will take a look at Sorrentto Therapeutics Inc (NASDAQ:SRNE), Seres Therapeutics Inc (NASDAQ:MCRB), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), and Tilly’s Inc (NYSE:TLYS). This group of stocks’ market valuations resemble TMST’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRNE | 3 | 876 | -2 |
| MCRB | 6 | 6889 | -1 |
| MCFT | 17 | 75512 | 0 |
| TLYS | 14 | 57115 | 1 |
| Average | 10 | 35098 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $38 million in TMST’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Sorrentto Therapeutics Inc (NASDAQ:SRNE) is the least popular one with only 3 bullish hedge fund positions. Timkensteel Corporation (NYSE:TMST) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TMST wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TMST were disappointed as the stock returned -7.5% during the fourth quarter (through the end of November) 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
