Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Tredegar Corporation (NYSE:TG).
Is Tredegar Corporation (NYSE:TG) an attractive investment right now? The smart money is taking an optimistic view. The number of bullish hedge fund bets went up by 3 in recent months. Our calculations also showed that tg isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the recent hedge fund action surrounding Tredegar Corporation (NYSE:TG).
What have hedge funds been doing with Tredegar Corporation (NYSE:TG)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in TG heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Tredegar Corporation (NYSE:TG). GAMCO Investors has a $88.3 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $1.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and Thomas Bailard’s Bailard Inc.
As one would reasonably expect, key money managers have jumped into Tredegar Corporation (NYSE:TG) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Tredegar Corporation (NYSE:TG). Arrowstreet Capital had $1.2 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $0.3 million position during the quarter. The following funds were also among the new TG investors: Mike Vranos’s Ellington, Matthew Hulsizer’s PEAK6 Capital Management, and Chuck Royce’s Royce & Associates.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tredegar Corporation (NYSE:TG) but similarly valued. These stocks are Halcon Resources Corp (NYSE:HK), HomeStreet Inc (NASDAQ:HMST), Investment Technology Group, Inc. (NYSE:ITG), and Investors Real Estate Trust (NYSE:IRET). This group of stocks’ market valuations are similar to TG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HK | 23 | 248692 | -6 |
| HMST | 6 | 23783 | -1 |
| ITG | 10 | 30170 | -3 |
| IRET | 7 | 34096 | 0 |
| Average | 11.5 | 84185 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $94 million in TG’s case. Halcon Resources Corp (NYSE:HK) is the most popular stock in this table. On the other hand HomeStreet Inc (NASDAQ:HMST) is the least popular one with only 6 bullish hedge fund positions. Tredegar Corporation (NYSE:TG) 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 HK might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
