Is Twin Disc, Incorporated (TWIN) A Good Stock To Buy?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Twin Disc, Incorporated (NASDAQ:TWIN) has experienced a decrease in hedge fund sentiment lately. There were 8 hedge funds in our database with TWIN holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Talend SA ADR (NASDAQ:TLND), YuMe Inc (NYSE:YUME), and Pure Cycle Corporation (NASDAQ:PCYO) to gather more data points.

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Now, we’re going to analyze the latest action encompassing Twin Disc, Incorporated (NASDAQ:TWIN).

How have hedgies been trading Twin Disc, Incorporated (NASDAQ:TWIN)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, down 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TWIN over the last 5 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, GAMCO Investors, led by Mario Gabelli, holds the largest position in Twin Disc, Incorporated (NASDAQ:TWIN). According to regulatory filings, the fund has a $13.6 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Lafitte Capital Management, led by Bryant Regan, which holds a $1.2 million position; 0.7% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise Jim Simons’s Renaissance Technologies, one of the biggest hedge funds in the world, Israel Englander’s Millennium Management and Peter Schliemann’s Rutabaga Capital Management. 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.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Laurion Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified TWIN as a viable investment and initiated a position in the stock.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Twin Disc, Incorporated (NASDAQ:TWIN) but similarly valued. We will take a look at Talend SA ADR (NASDAQ:TLND), YuMe Inc (NYSE:YUME), Pure Cycle Corporation (NASDAQ:PCYO), and Points International Ltd (USA) (NASDAQ:PCOM). This group of stocks’ market values match TWIN’s market value.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $17 million in TWIN’s case. YuMe Inc (NYSE:YUME) is the most popular stock in this table. On the other hand Points International Ltd (USA) (NASDAQ:PCOM) is the least popular one with only 5 bullish hedge fund positions. Twin Disc, Incorporated (NASDAQ:TWIN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard YUME might be a better candidate to consider taking a long position in.

Disclosure: none.