The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at TriNet Group Inc (NYSE:TNET) from the perspective of those elite funds.
Is TriNet Group Inc (NYSE:TNET) a worthy investment today? Hedge funds are becoming hopeful. The number of long hedge fund bets advanced by 7 in recent months. Our calculations also showed that tnet isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a peek at the key hedge fund action regarding TriNet Group Inc (NYSE:TNET).
How have hedgies been trading TriNet Group Inc (NYSE:TNET)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 41% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TNET over the last 15 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Cantillon Capital Management was the largest shareholder of TriNet Group Inc (NYSE:TNET), with a stake worth $253.4 million reported as of the end of March. Trailing Cantillon Capital Management was Millennium Management, which amassed a stake valued at $32 million. Harbor Spring Capital, D E Shaw, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Now, specific money managers have been driving this bullishness. North Peak Capital, managed by Michael Kahan and Jeremy Kahan, created the most valuable position in TriNet Group Inc (NYSE:TNET). North Peak Capital had $8.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $5 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Dmitry Balyasny’s Balyasny Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TriNet Group Inc (NYSE:TNET) but similarly valued. These stocks are Commscope Holding Company Inc (NASDAQ:COMM), Spire Inc. (NYSE:SR), Performance Food Group Company (NYSE:PFGC), and Gates Industrial Corporation plc (NYSE:GTES). This group of stocks’ market valuations match TNET’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COMM | 23 | 1123484 | -5 |
| SR | 15 | 100138 | 2 |
| PFGC | 25 | 192437 | 7 |
| GTES | 9 | 9016 | 1 |
| Average | 18 | 356269 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $417 million in TNET’s case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 9 bullish hedge fund positions. TriNet Group Inc (NYSE:TNET) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on TNET as the stock returned 6.5% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
