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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 835 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 TriNet Group Inc (NYSE:TNET), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is TriNet Group Inc (NYSE:TNET) a buy here? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund bets went down by 1 recently. Our calculations also showed that TNET isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). TNET was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 21 hedge funds in our database with TNET positions at the end of the previous quarter.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
William Von Mueffling of Cantillon Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 analyze the new hedge fund action encompassing TriNet Group Inc (NYSE:TNET).
Hedge fund activity in TriNet Group Inc (NYSE:TNET)
Heading into the first quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in TNET a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TriNet Group Inc (NYSE:TNET) was held by Cantillon Capital Management, which reported holding $228.7 million worth of stock at the end of September. It was followed by HG Vora Capital Management with a $42.5 million position. Other investors bullish on the company included Harbor Spring Capital, D E Shaw, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to TriNet Group Inc (NYSE:TNET), around 3.98% of its 13F portfolio. Harbor Spring Capital is also relatively very bullish on the stock, designating 3.44 percent of its 13F equity portfolio to TNET.
Due to the fact that TriNet Group Inc (NYSE:TNET) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $23.7 million in stock. Richard Driehaus’s fund, Driehaus Capital, also dumped its stock, about $2.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to TriNet Group Inc (NYSE:TNET). We will take a look at Tenet Healthcare Corp (NYSE:THC), LendingTree, Inc (NASDAQ:TREE), Blueprint Medicines Corporation (NASDAQ:BPMC), and CarGurus, Inc. (NASDAQ:CARG). This group of stocks’ market values match TNET’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THC | 34 | 1170950 | 8 |
| TREE | 26 | 104147 | 3 |
| BPMC | 37 | 786766 | 10 |
| CARG | 33 | 936090 | 11 |
| Average | 32.5 | 749488 | 8 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $749 million. That figure was $388 million in TNET’s case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand LendingTree, Inc (NASDAQ:TREE) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks TriNet Group Inc (NYSE:TNET) is even less popular than TREE. Hedge funds dodged a bullet by taking a bearish stance towards TNET. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately TNET wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TNET investors were disappointed as the stock returned -32.9% 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
