Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Timkensteel Corp (NYSE:TMST) changed recently.
Timkensteel Corp (NYSE:TMST) has experienced an increase in hedge fund sentiment in recent months. TMST was in 16 hedge funds’ portfolios at the end of the third quarter of 2015. There were 13 hedge funds in our database with TMST positions at the end of the previous quarter. At the end of this article we will also compare TMST to other stocks, including WL Ross Holding Corp (NASDAQ:WLRHU), Star Bulk Carriers Corp. (NASDAQ:SBLK), and Ennis, Inc. (NYSE:EBF) to get a better sense of its popularity.
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In the financial world, there are a large number of tools market participants put to use to analyze their holdings. A duo of the most underrated tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the market by a solid margin (see the details here).
Now, let’s take a glance at the new action encompassing Timkensteel Corp (NYSE:TMST).
What have hedge funds been doing with Timkensteel Corp (NYSE:TMST)?
Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 23% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw has the biggest position in Timkensteel Corp (NYSE:TMST), worth close to $9.1 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Litespeed Management, led by Jamie Zimmerman, holding a $8.7 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of Ed Beddow and William Tichy’s Beddow Capital Management, Chuck Royce’s Royce & Associates, and Robert Jaffe’s Force Capital.
As one would reasonably expect, key money managers were leading the bulls’ herd. PDT Partners, managed by Peter Muller, assembled the largest position in Timkensteel Corp (NYSE:TMST). PDT Partners had $0.4 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $0.2 million investment in the stock during the quarter. The following funds were also among the new TMST investors: Mike Vranos’s Ellington, Joel Greenblatt’s Gotham Asset Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s go over hedge fund activity in other stocks similar to Timkensteel Corp (NYSE:TMST). We will take a look at WL Ross Holding Corp (NASDAQ:WLRHU), Star Bulk Carriers Corp. (NASDAQ:SBLK), Ennis, Inc. (NYSE:EBF), and Ardelyx Inc (NASDAQ:ARDX). This group of stocks’ market caps are closest to TMST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WLRHU | 19 | 109151 | 1 |
| SBLK | 6 | 297888 | -2 |
| EBF | 14 | 22993 | -2 |
| ARDX | 7 | 71550 | -3 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $125 million, versus $33 million in TMST’s case. WL Ross Holding Corp (NASDAQ:WLRHU) is the most popular stock in this table with 19 investors holding shares, while Star Bulk Carriers Corp. (NASDAQ:SBLK) is the least popular one with only six bullish hedge fund positions. Even though Timkensteel Corp (NYSE:TMST) is not the most popular stock in this group, the hedge fund interest towards the stock 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. In this regard WLRHU might be a better candidate to consider a long position.
