Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards TrustCo Bank Corp NY (NASDAQ:TRST) to find out whether it was one of their high conviction long-term ideas.
Is TrustCo Bank Corp NY (NASDAQ:TRST) ready to rally soon? Prominent investors are reducing their bets on the stock. The number of bullish hedge fund bets went down by 1 lately. Our calculations also showed that TRST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TRST was in 11 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with TRST holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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 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.
John Overdeck of Two Sigma Advisors
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 view the recent hedge fund action regarding TrustCo Bank Corp NY (NASDAQ:TRST).
What does smart money think about TrustCo Bank Corp NY (NASDAQ:TRST)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in TRST a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in TrustCo Bank Corp NY (NASDAQ:TRST), which was worth $21.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $13.6 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and AQR Capital Management 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 Royce & Associates allocated the biggest weight to TrustCo Bank Corp NY (NASDAQ:TRST), around 0.2% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to TRST.
Because TrustCo Bank Corp NY (NASDAQ:TRST) has experienced declining sentiment from the smart money, we can see that there were a few hedge funds that decided to sell off their positions entirely in the third quarter. Intriguingly, Israel Englander’s Millennium Management dropped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $4 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TrustCo Bank Corp NY (NASDAQ:TRST) but similarly valued. These stocks are Wabash National Corporation (NYSE:WNC), Opus Bank (NASDAQ:OPB), Pacific Biosciences of California, Inc. (NASDAQ:PACB), and INTL Fcstone Inc (NASDAQ:INTL). This group of stocks’ market values match TRST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WNC | 16 | 58825 | 1 |
| OPB | 8 | 127185 | -1 |
| PACB | 23 | 132095 | 1 |
| INTL | 10 | 92507 | -1 |
| Average | 14.25 | 102653 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $43 million in TRST’s case. Pacific Biosciences of California, Inc. (NASDAQ:PACB) is the most popular stock in this table. On the other hand Opus Bank (NASDAQ:OPB) is the least popular one with only 8 bullish hedge fund positions. TrustCo Bank Corp NY (NASDAQ:TRST) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on TRST, though not to the same extent, as the stock returned 7.7% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
