Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Teekay Tankers Ltd. (NYSE:TNK).
Is TNK a good stock to buy? Teekay Tankers Ltd. (NYSE:TNK) investors should be aware of an increase in hedge fund interest in recent months. Teekay Tankers Ltd. (NYSE:TNK) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 21. Our calculations also showed that TNK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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.
Nick Thakore of Diametric 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 we’re going to review the recent hedge fund action regarding Teekay Tankers Ltd. (NYSE:TNK).
Do Hedge Funds Think TNK Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TNK over the last 24 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Granite Point Capital was the largest shareholder of Teekay Tankers Ltd. (NYSE:TNK), with a stake worth $7.9 million reported as of the end of June. Trailing Granite Point Capital was Alden Global Capital, which amassed a stake valued at $3.7 million. Amitell Capital, QVT Financial, and Citadel Investment Group 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 Alden Global Capital allocated the biggest weight to Teekay Tankers Ltd. (NYSE:TNK), around 7.45% of its 13F portfolio. Amitell Capital is also relatively very bullish on the stock, designating 2.01 percent of its 13F equity portfolio to TNK.
As industrywide interest jumped, specific money managers have jumped into Teekay Tankers Ltd. (NYSE:TNK) headfirst. D E Shaw, managed by D. E. Shaw, assembled the largest position in Teekay Tankers Ltd. (NYSE:TNK). D E Shaw had $0.8 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0.7 million investment in the stock during the quarter. The other funds with brand new TNK positions are Michael Gelband’s ExodusPoint Capital and Matthew L Pinz’s Pinz Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Teekay Tankers Ltd. (NYSE:TNK) but similarly valued. We will take a look at Soliton, Inc. (NASDAQ:SOLY), Lawson Products, Inc. (NASDAQ:LAWS), Kimball International Inc (NASDAQ:KBAL), Tuscan Holdings Corp. (NASDAQ:THCB), Clearwater Paper Corp (NYSE:CLW), Electrameccanica Vehicles Corp. (NASDAQ:SOLO), and Tilly’s Inc (NYSE:TLYS). This group of stocks’ market valuations are similar to TNK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SOLY | 11 | 44380 | 7 |
| LAWS | 4 | 32783 | -1 |
| KBAL | 14 | 39683 | -2 |
| THCB | 8 | 22827 | -2 |
| CLW | 9 | 19395 | -5 |
| SOLO | 7 | 6335 | 0 |
| TLYS | 18 | 59750 | 3 |
| Average | 10.1 | 32165 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $14 million in TNK’s case. Tilly’s Inc (NYSE:TLYS) is the most popular stock in this table. On the other hand Lawson Products, Inc. (NASDAQ:LAWS) is the least popular one with only 4 bullish hedge fund positions. Teekay Tankers Ltd. (NYSE:TNK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TNK is 41.7. 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 negative signal and 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately TNK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TNK investors were disappointed as the stock returned -3.8% since the end of June (through 9/27) 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 most of these stocks already outperformed the market in 2021.
Follow Teekay Tankers Ltd (NYSE:TNK)
Follow Teekay Tankers Ltd (NYSE:TNK)
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Disclosure: None. This article was originally published at Insider Monkey.
