World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is TransCanada Corporation (USA) (NYSE:TRP) a buy right now? The smart money is actually taking a pessimistic view. The number of bullish hedge fund bets dropped by 4 lately. There were 18 hedge funds in our database with TRP positions at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as LyondellBasell Industries NV (NYSE:LYB), Boston Scientific Corporation (NYSE:BSX), and PG&E Corporation (NYSE:PCG) to gather more data points.
Follow Tc Energy Corporation (NYSE:TRP)
Follow Tc Energy Corporation (NYSE:TRP)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Zorandim/Shutterstock.com
Keeping this in mind, let’s take a gander at the recent action surrounding TransCanada Corporation (USA) (NYSE:TRP).
Hedge fund activity in TransCanada Corporation (USA) (NYSE:TRP)
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the second quarter of 2016. On the other hand, there were a total of 12 hedge funds with a bullish position in TRP at the beginning of this year. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Millennium Management, led by Israel Englander, holds the biggest position in TransCanada Corporation (USA) (NYSE:TRP). Millennium Management has a $73.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Luminus Management, led by Jonathan Barrett and Paul Segal, which holds a $70.3 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include Eric Sprott’s Sprott Asset Management, Cliff Asness’s AQR Capital Management and Daniel Bubis’s Tetrem Capital Management. We should note that two of these hedge funds (Luminus Management and Sprott Asset Management) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that TransCanada Corporation (USA) (NYSE:TRP) has faced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that slashed their full holdings heading into Q4. Interestingly, Alec Litowitz and Ross Laser’s Magnetar Capital cut the biggest stake of all the investors watched by Insider Monkey, worth about $83.9 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund cut about $9.1 million worth of shares.
Let’s check out hedge fund activity in other stocks similar to TransCanada Corporation (USA) (NYSE:TRP). These stocks are LyondellBasell Industries NV (NYSE:LYB), Boston Scientific Corporation (NYSE:BSX), PG&E Corporation (NYSE:PCG), and Prudential Financial Inc (NYSE:PRU). This group of stocks’ market values are similar to TRP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LYB | 51 | 2441555 | 8 |
| BSX | 46 | 1735257 | -1 |
| PCG | 23 | 1088480 | -3 |
| PRU | 28 | 520358 | -7 |
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1446 million. That figure was $332 million in TRP’s case. LyondellBasell Industries NV (NYSE:LYB) is the most popular stock in this table. On the other hand PG&E Corporation (NYSE:PCG) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks TransCanada Corporation (USA) (NYSE:TRP) is even less popular than PCG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
