Is Trean Insurance Group, Inc. (TIG) Going to Burn These Hedge Funds?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Trean Insurance Group, Inc. (NASDAQ:TIG), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Trean Insurance Group, Inc. (NASDAQ:TIG) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 14. TIG investors should pay attention to a decrease in hedge fund interest of late. There were 11 hedge funds in our database with TIG holdings at the end of March. Our calculations also showed that TIG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Halbower of Pentwater 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. Keeping this in mind we’re going to go over the recent hedge fund action encompassing Trean Insurance Group, Inc. (NASDAQ:TIG).

Do Hedge Funds Think TIG Is A Good Stock To Buy Now?

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the first quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in TIG a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Trean Insurance Group, Inc. (NASDAQ:TIG), which was worth $41.7 million at the end of the second quarter. On the second spot was Driehaus Capital which amassed $12 million worth of shares. CaaS Capital, Full18 Capital, and Pentwater Capital Management 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 Full18 Capital allocated the biggest weight to Trean Insurance Group, Inc. (NASDAQ:TIG), around 0.37% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.29 percent of its 13F equity portfolio to TIG.

Seeing as Trean Insurance Group, Inc. (NASDAQ:TIG) has faced bearish sentiment from the smart money, we can see that there is a sect of fund managers that elected to cut their entire stakes heading into Q3. It’s worth mentioning that Stuart J. Zimmer’s Zimmer Partners dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising an estimated $11.7 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund said goodbye to about $2.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to Trean Insurance Group, Inc. (NASDAQ:TIG). We will take a look at Brooklyn ImmunoTherapeutics, Inc. (NYSE:BTX), Horizon Bancorp, Inc. (NASDAQ:HBNC), Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), Atossa Therapeutics, Inc. (NASDAQ:ATOS), Xenon Pharmaceuticals Inc (NASDAQ:XENE), QCR Holdings, Inc. (NASDAQ:QCRH), and Amneal Pharmaceuticals, Inc. (NYSE:AMRX). This group of stocks’ market valuations match TIG’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $58 million in TIG’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Brooklyn ImmunoTherapeutics, Inc. (NYSE:BTX) is the least popular one with only 1 bullish hedge fund positions. Trean Insurance Group, Inc. (NASDAQ:TIG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TIG is 42.1. 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 TIG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TIG investors were disappointed as the stock returned -30.2% 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.

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Disclosure: None. This article was originally published at Insider Monkey.