We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Thomson Reuters Corporation (NYSE:TRI).
Hedge fund interest in Thomson Reuters Corporation (NYSE:TRI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare TRI to other stocks including Newmont Corporation (NYSE:NEM), NXP Semiconductors NV (NASDAQ:NXPI), and The Travelers Companies, Inc. (NYSE:TRV) to get a better sense of its popularity.
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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Blair Levinsky of Waratah Capital Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the latest hedge fund action surrounding Thomson Reuters Corporation (NYSE:TRI).
What does smart money think about Thomson Reuters Corporation (NYSE:TRI)?
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in TRI over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Thomson Reuters Corporation (NYSE:TRI) was held by Millennium Management, which reported holding $60 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $58.9 million position. Other investors bullish on the company included Samlyn Capital, Arrowstreet Capital, and Strycker View Capital. In terms of the portfolio weights assigned to each position Strycker View Capital allocated the biggest weight to Thomson Reuters Corporation (NYSE:TRI), around 11.68% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, setting aside 3.7 percent of its 13F equity portfolio to TRI.
Due to the fact that Thomson Reuters Corporation (NYSE:TRI) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers that elected to cut their positions entirely last quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest stake of the 750 funds tracked by Insider Monkey, totaling about $17.1 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $0.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Thomson Reuters Corporation (NYSE:TRI). These stocks are Newmont Corporation (NYSE:NEM), NXP Semiconductors NV (NASDAQ:NXPI), The Travelers Companies, Inc. (NYSE:TRV), and Canadian Pacific Railway Limited (NYSE:CP). All of these stocks’ market caps are similar to TRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEM | 34 | 990094 | -10 |
| NXPI | 80 | 3769335 | 18 |
| TRV | 39 | 906120 | 1 |
| CP | 29 | 1760164 | -4 |
| Average | 45.5 | 1856428 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.5 hedge funds with bullish positions and the average amount invested in these stocks was $1856 million. That figure was $344 million in TRI’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Canadian Pacific Railway Limited (NYSE:CP) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Thomson Reuters Corporation (NYSE:TRI) is even less popular than CP. Hedge funds clearly dropped the ball on TRI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on TRI as the stock returned -3.3% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
