The successful funds run by legendary investors such as Dan Loeb and David Tepper 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 incentive 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 Trupanion Inc (NYSE:TRUP) from the perspective of those successful funds.
Trupanion Inc (NYSE:TRUP) shareholders have witnessed an increase in hedge fund sentiment lately. TRUP was in 10 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with TRUP positions at the end of the previous quarter. At the end of this article we will also compare TRUP to other stocks including Camden National Corporation (NASDAQ:CAC), ArcBest Corp (NASDAQ:ARCB), and PJT Partners Inc (NYSE:PJT) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How have hedgies been trading Trupanion Inc (NYSE:TRUP)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 67% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TRUP over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Michael Sidhom’s Immersion Capital has the most valuable position in Trupanion Inc (NYSE:TRUP), worth close to $25.8 million, comprising 10.8% of its total 13F portfolio. Sitting at the No. 2 spot is Broadfin Capital, led by Kevin Kotler, which holds a $2.7 million position. Remaining peers that are bullish encompass Renaissance Technologies, one of the largest hedge funds in the world, John Overdeck and David Siegel’s Two Sigma Advisors, and Jonathan Lourie and Stuart Fiertz’s Cheyne Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Broadfin Capital assembled the largest position in Trupanion Inc (NYSE:TRUP). Jonathan Lourie and Stuart Fiertz’s Cheyne Capital also made a $1 million investment in the stock during the quarter. The other funds with brand new TRUP positions are Ken Griffin’s Citadel Investment Group, Frank Slattery’s Symmetry Peak Management, and Richard Driehaus’ Driehaus Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Trupanion Inc (NYSE:TRUP) but similarly valued. We will take a look at Camden National Corporation (NASDAQ:CAC), ArcBest Corp (NASDAQ:ARCB), PJT Partners Inc (NYSE:PJT), and Bazaarvoice Inc (NASDAQ:BV). This group of stocks’ market values resemble TRUP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAC | 6 | 66695 | 0 |
| ARCB | 13 | 26835 | 2 |
| PJT | 10 | 141761 | -4 |
| BV | 24 | 145630 | 7 |
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 $95 million. That figure was $36 million in TRUP’s case. Bazaarvoice Inc (NASDAQ:BV) is the most popular stock in this table. On the other hand Camden National Corporation (NASDAQ:CAC) is the least popular one with only 6 bullish hedge fund positions. Trupanion Inc (NYSE:TRUP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BV might be a better candidate to consider taking a long position in.
Disclosure: None
