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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Tenaris S.A. (NYSE:TS) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Tenaris S.A. (NYSE:TS) ready to rally soon? Hedge funds are in an optimistic mood. The number of long hedge fund positions moved up by 5 lately. Our calculations also showed that TS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are perceived as unimportant, old financial tools of years past. While there are more than 8000 funds trading at present, Our researchers hone in on the elite of this club, around 850 funds. These investment experts administer the lion’s share of the smart money’s total asset base, and by paying attention to their matchless investments, Insider Monkey has revealed a few investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind let’s analyze the fresh hedge fund action surrounding Tenaris S.A. (NYSE:TS).
What does smart money think about Tenaris S.A. (NYSE:TS)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 45% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in TS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Tenaris S.A. (NYSE:TS), which was worth $175.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $58.5 million worth of shares. Millennium Management, Arrowstreet Capital, and D E Shaw 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 Centenus Global Management allocated the biggest weight to Tenaris S.A. (NYSE:TS), around 0.46% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, designating 0.26 percent of its 13F equity portfolio to TS.
As aggregate interest increased, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Tenaris S.A. (NYSE:TS). Arrowstreet Capital had $30.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $6.1 million position during the quarter. The other funds with new positions in the stock are Sara Nainzadeh’s Centenus Global Management, Donald Sussman’s Paloma Partners, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tenaris S.A. (NYSE:TS) but similarly valued. We will take a look at Atmos Energy Corporation (NYSE:ATO), Arconic Inc. (NYSE:ARNC), Host Hotels and Resorts Inc (NYSE:HST), and Wheaton Precious Metals Corp. (NYSE:WPM). All of these stocks’ market caps resemble TS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATO | 26 | 315309 | 3 |
| ARNC | 43 | 3678178 | 8 |
| HST | 27 | 409585 | -3 |
| WPM | 30 | 476804 | 1 |
| Average | 31.5 | 1219969 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $1220 million. That figure was $369 million in TS’s case. Arconic Inc. (NYSE:ARNC) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Tenaris S.A. (NYSE:TS) is even less popular than ATO. Hedge funds dodged a bullet by taking a bearish stance towards TS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately TS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TS investors were disappointed as the stock returned -56.7% 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 so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
