Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Tejon Ranch Company (NYSE:TRC) a healthy stock for your portfolio? Hedge funds are getting less optimistic. The number of long hedge fund positions were cut by 1 recently. Our calculations also showed that trc isn’t among the 30 most popular stocks among hedge funds.
In today’s marketplace there are tons of methods stock market investors can use to value their stock investments. Two of the less known methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top money managers can trounce their index-focused peers by a significant margin (see the details here).
Martin Whitman of Third Avenue Management
We’re going to take a look at the fresh hedge fund action encompassing Tejon Ranch Company (NYSE:TRC).
How have hedgies been trading Tejon Ranch Company (NYSE:TRC)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in TRC a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Tejon Ranch Company (NYSE:TRC), which was worth $27 million at the end of the first quarter. On the second spot was Third Avenue Management which amassed $18.1 million worth of shares. Moreover, GAMCO Investors, Ariel Investments, and MFP Investors were also bullish on Tejon Ranch Company (NYSE:TRC), allocating a large percentage of their portfolios to this stock.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified TRC as a viable investment and initiated a position in the stock.
Let’s go over 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 Oxford Immunotec Global PLC (NASDAQ:OXFD), The Bancorp, Inc. (NASDAQ:TBBK), Equity Bancshares, Inc. (NASDAQ:EQBK), and Earthstone Energy, Inc. (NYSE:ESTE). All of these stocks’ market caps match TRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OXFD | 17 | 167837 | 4 |
| TBBK | 16 | 68854 | 2 |
| EQBK | 7 | 42572 | 0 |
| ESTE | 7 | 7208 | 0 |
| Average | 11.75 | 71618 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $81 million in TRC’s case. Oxford Immunotec Global PLC (NASDAQ:OXFD) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 7 bullish hedge fund positions. Tejon Ranch Company (NYSE:TRC) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TRC investors were disappointed as the stock returned -5.2% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
