Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Trueblue Inc (NYSE:TBI).
Trueblue Inc (NYSE:TBI) has experienced a decrease in hedge fund interest recently. TBI was in 15 hedge funds’ portfolios at the end of the second quarter of 2019. There were 17 hedge funds in our database with TBI holdings at the end of the previous quarter. Our calculations also showed that TBI isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the recent hedge fund action regarding Trueblue Inc (NYSE:TBI).
How have hedgies been trading Trueblue Inc (NYSE:TBI)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the first quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in TBI a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, GMT Capital was the largest shareholder of Trueblue Inc (NYSE:TBI), with a stake worth $46.6 million reported as of the end of March. Trailing GMT Capital was AQR Capital Management, which amassed a stake valued at $11.9 million. D E Shaw, Royce & Associates, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Trueblue Inc (NYSE:TBI) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of fund managers that slashed their full holdings in the second quarter. At the top of the heap, David Costen Haley’s HBK Investments cut the largest position of all the hedgies followed by Insider Monkey, worth about $0.7 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dumped about $0.7 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Trueblue Inc (NYSE:TBI). We will take a look at Seacor Holdings, Inc. (NYSE:CKH), Mercantil Bank Holding Corporation (NASDAQ:AMTB), Solar Capital Ltd. (NASDAQ:SLRC), and Yiren Digital Ltd. (NYSE:YRD). All of these stocks’ market caps are similar to TBI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CKH | 14 | 138413 | 3 |
| AMTB | 1 | 7607 | -4 |
| SLRC | 12 | 59440 | 1 |
| YRD | 3 | 6214 | 0 |
| Average | 7.5 | 52919 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $83 million in TBI’s case. Seacor Holdings, Inc. (NYSE:CKH) is the most popular stock in this table. On the other hand Mercantil Bank Holding Corporation (NASDAQ:AMTB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Trueblue Inc (NYSE:TBI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TBI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TBI were disappointed as the stock returned -4.4% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
