Here is What Hedge Funds Think About Triumph Group Inc (TGI)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Triumph Group Inc (NYSE:TGI).

Hedge fund interest in Triumph Group Inc (NYSE:TGI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TGI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare TGI to other stocks including Alexander & Baldwin Inc (NYSE:ALEX), Celldex Therapeutics, Inc. (NASDAQ:CLDX), and Seabridge Gold, Inc. (NYSE:SA) to get a better sense of its popularity.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Matthew Halbower of Pentwater Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the new hedge fund action surrounding Triumph Group Inc (NYSE:TGI).

Do Hedge Funds Think TGI Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in TGI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Maple Rock Capital held the most valuable stake in Triumph Group Inc (NYSE:TGI), which was worth $45.2 million at the end of the second quarter. On the second spot was Hill City Capital which amassed $31.1 million worth of shares. Royce & Associates, ACK Asset Management, and Renaissance Technologies 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 Hill City Capital allocated the biggest weight to Triumph Group Inc (NYSE:TGI), around 9.44% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, setting aside 8.05 percent of its 13F equity portfolio to TGI.

Seeing as Triumph Group Inc (NYSE:TGI) has experienced bearish sentiment from the smart money, logic holds that there were a few hedgies that slashed their positions entirely in the second quarter. Interestingly, Peter Muller’s PDT Partners said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising close to $3.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $2.7 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Triumph Group Inc (NYSE:TGI) but similarly valued. We will take a look at Alexander & Baldwin Inc (NYSE:ALEX), Celldex Therapeutics, Inc. (NASDAQ:CLDX), Seabridge Gold, Inc. (NYSE:SA), Knoll Inc (NYSE:KNL), The Shyft Group, Inc. (NASDAQ:SHYF), Sapiens International Corporation N.V. (NASDAQ:SPNS), and ImmunoGen, Inc. (NASDAQ:IMGN). All of these stocks’ market caps match TGI’s market cap.

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As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $201 million in TGI’s case. ImmunoGen, Inc. (NASDAQ:IMGN) is the most popular stock in this table. On the other hand Sapiens International Corporation N.V. (NASDAQ:SPNS) is the least popular one with only 9 bullish hedge fund positions. Triumph Group Inc (NYSE:TGI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TGI is 68.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately TGI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TGI were disappointed as the stock returned -3.2% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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