Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in TORM plc (NASDAQ:TRMD)? The smart money sentiment can provide an answer to this question.
Is TRMD stock a buy here? TORM plc (NASDAQ:TRMD) has seen an increase in hedge fund sentiment recently. TORM plc (NASDAQ:TRMD) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TRMD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 latest hedge fund action encompassing TORM plc (NASDAQ:TRMD).
Do Hedge Funds Think TRMD Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TRMD over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Howard Marks’s Oaktree Capital Management has the biggest position in TORM plc (NASDAQ:TRMD), worth close to $491.5 million, comprising 7.5% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $2.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain John Overdeck and David Siegel’s Two Sigma Advisors, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to TORM plc (NASDAQ:TRMD), around 7.54% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0035 percent of its 13F equity portfolio to TRMD.
Consequently, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in TORM plc (NASDAQ:TRMD). Arrowstreet Capital had $2.6 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.3 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks similar to TORM plc (NASDAQ:TRMD). These stocks are American Software, Inc. (NASDAQ:AMSWA), Albireo Pharma, Inc. (NASDAQ:ALBO), The RMR Group Inc. (NASDAQ:RMR), Qiwi PLC (NASDAQ:QIWI), Kadmon Holdings, Inc. (NASDAQ:KDMN), GAN Limited (NASDAQ:GAN), and iHuman Inc. (NYSE:IH). This group of stocks’ market caps are closest to TRMD’s market cap.
Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
---|---|---|---|
AMSWA | 6 | 46565 | -2 |
ALBO | 15 | 170627 | -2 |
RMR | 16 | 100223 | -1 |
QIWI | 5 | 18584 | -4 |
KDMN | 24 | 286093 | -7 |
GAN | 11 | 64056 | -11 |
IH | 1 | 371 | -3 |
Average | 11.1 | 98074 | -4.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $495 million in TRMD’s case. Kadmon Holdings, Inc. (NASDAQ:KDMN) is the most popular stock in this table. On the other hand iHuman Inc. (NYSE:IH) is the least popular one with only 1 bullish hedge fund positions. TORM plc (NASDAQ:TRMD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TRMD is 42.5. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately TRMD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TRMD investors were disappointed as the stock returned -2.6% since the end of March (through 6/11) 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.