We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Trueblue Inc (NYSE:TBI).
Trueblue Inc (NYSE:TBI) has experienced a decrease in hedge fund sentiment lately. TBI was in 14 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with TBI holdings at the end of the previous quarter. Our calculations also showed that TBI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the recent hedge fund action regarding Trueblue Inc (NYSE:TBI).
How have hedgies been trading Trueblue Inc (NYSE:TBI)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in TBI over the last 17 quarters. 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, GMT Capital held the most valuable stake in Trueblue Inc (NYSE:TBI), which was worth $41.2 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $13.1 million worth of shares. D E Shaw, Royce & Associates, and Renaissance Technologies 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 GMT Capital allocated the biggest weight to Trueblue Inc (NYSE:TBI), around 1.52% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.47 percent of its 13F equity portfolio to TBI.
Judging by the fact that Trueblue Inc (NYSE:TBI) has witnessed falling interest from the smart money, logic holds that there were a few hedge funds who sold off their positions entirely in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest position of the 750 funds followed by Insider Monkey, comprising close to $3.7 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Trueblue Inc (NYSE:TBI). We will take a look at Interface, Inc. (NASDAQ:TILE), ShockWave Medical, Inc. (NASDAQ:SWAV), Washington Trust Bancorp, Inc. (NASDAQ:WASH), and FARO Technologies, Inc. (NASDAQ:FARO). This group of stocks’ market valuations resemble TBI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TILE | 14 | 44528 | 2 |
| SWAV | 10 | 51360 | 3 |
| WASH | 8 | 29820 | 1 |
| FARO | 8 | 47745 | 1 |
| Average | 10 | 43363 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $74 million in TBI’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand Washington Trust Bancorp, Inc. (NASDAQ:WASH) is the least popular one with only 8 bullish hedge fund positions. Trueblue Inc (NYSE:TBI) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on TBI as the stock returned 10.5% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
