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. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Transcat, Inc. (NASDAQ:TRNS) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare TRNS to other stocks including Level One Bancorp, Inc. (NASDAQ:LEVL), GlycoMimetics, Inc. (NASDAQ:GLYC), and Phoenix New Media Ltd ADR (NYSE:FENG) to get a better sense of its popularity.
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.
Chuck Royce of Royce & Associates
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 take a look at the recent hedge fund action regarding Transcat, Inc. (NASDAQ:TRNS).
What have hedge funds been doing with Transcat, Inc. (NASDAQ:TRNS)?
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TRNS 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Minerva Advisors, managed by David P. Cohen, holds the number one position in Transcat, Inc. (NASDAQ:TRNS). Minerva Advisors has a $9.9 million position in the stock, comprising 5.5% of its 13F portfolio. The second largest stake is held by Richard S. Meisenberg of ACK Asset Management, with a $8.3 million position; 2.3% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions encompass Chuck Royce’s Royce & Associates, Frederick DiSanto’s Ancora Advisors and Mark Broach’s Manatuck Hill Partners. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Transcat, Inc. (NASDAQ:TRNS), around 5.53% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, designating 2.34 percent of its 13F equity portfolio to TRNS.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to Transcat, Inc. (NASDAQ:TRNS). These stocks are Level One Bancorp, Inc. (NASDAQ:LEVL), GlycoMimetics, Inc. (NASDAQ:GLYC), Phoenix New Media Ltd ADR (NYSE:FENG), and Elevate Credit, Inc. (NYSE:ELVT). This group of stocks’ market values resemble TRNS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEVL | 2 | 1339 | 1 |
| GLYC | 7 | 58509 | -2 |
| FENG | 7 | 18685 | -2 |
| ELVT | 11 | 20789 | 1 |
| Average | 6.75 | 24831 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $28 million in TRNS’s case. Elevate Credit, Inc. (NYSE:ELVT) is the most popular stock in this table. On the other hand Level One Bancorp, Inc. (NASDAQ:LEVL) is the least popular one with only 2 bullish hedge fund positions. Transcat, Inc. (NASDAQ:TRNS) 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 TRNS as the stock returned 28% 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.
