We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Tejon Ranch Company (NYSE:TRC).
Tejon Ranch Company (NYSE:TRC) was in 10 hedge funds’ portfolios at the end of the second quarter of 2019. TRC has experienced a decrease in hedge fund sentiment in recent months. There were 11 hedge funds in our database with TRC holdings at the end of the previous quarter. Our calculations also showed that TRC 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely 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. We’re going to take a glance at the key hedge fund action encompassing Tejon Ranch Company (NYSE:TRC).
What have hedge funds been doing with Tejon Ranch Company (NYSE:TRC)?
Heading into the third quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in TRC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Royce & Associates was the largest shareholder of Tejon Ranch Company (NYSE:TRC), with a stake worth $25 million reported as of the end of March. Trailing Royce & Associates was Third Avenue Management, which amassed a stake valued at $16.3 million. GAMCO Investors, MFP Investors, and Ariel Investments were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Tejon Ranch Company (NYSE:TRC) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds who sold off their full holdings heading into Q3. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, worth close to $0.9 million in stock, and Charles Lemonides’s Valueworks LLC was right behind this move, as the fund sold off about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tejon Ranch Company (NYSE:TRC) but similarly valued. We will take a look at USA Technologies, Inc. (NASDAQ:USAT), SeaDrill Limited (NYSE:SDRL), At Home Group Inc. (NYSE:HOME), and Duluth Holdings Inc. (NASDAQ:DLTH). This group of stocks’ market caps match TRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| USAT | 12 | 116273 | -2 |
| SDRL | 18 | 121949 | -2 |
| HOME | 15 | 67444 | -17 |
| DLTH | 10 | 18575 | -2 |
| Average | 13.75 | 81060 | -5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $77 million in TRC’s case. SeaDrill Limited (NYSE:SDRL) is the most popular stock in this table. On the other hand Duluth Holdings Inc. (NASDAQ:DLTH) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Tejon Ranch Company (NYSE:TRC) is even less popular than DLTH. 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. A small number of hedge funds were also right about betting on TRC, though not to the same extent, as the stock returned 2.3% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
