Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Transportadora de Gas del Sur SA (NYSE:TGS) is a good investment right now.
Is Transportadora de Gas del Sur SA (NYSE:TGS) the right pick for your portfolio? Hedge funds are becoming hopeful. The number of long hedge fund bets inched up by 1 lately. Our calculations also showed that TGS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). TGS was in 10 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 9 hedge funds in our database with TGS holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the key hedge fund action encompassing Transportadora de Gas del Sur SA (NYSE:TGS).
What have hedge funds been doing with Transportadora de Gas del Sur SA (NYSE:TGS)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in TGS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Oaktree Capital Management held the most valuable stake in Transportadora de Gas del Sur SA (NYSE:TGS), which was worth $13.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $2.7 million worth of shares. Arrowstreet Capital, Marathon Asset Management, and Renaissance Technologies 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 Marathon Asset Management allocated the biggest weight to Transportadora de Gas del Sur SA (NYSE:TGS), around 0.96% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to TGS.
Now, key hedge funds have been driving this bullishness. Marathon Asset Management, managed by Bruce J. Richards and Louis Hanover, created the most outsized position in Transportadora de Gas del Sur SA (NYSE:TGS). Marathon Asset Management had $1.8 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new TGS investors: Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Transportadora de Gas del Sur SA (NYSE:TGS) but similarly valued. These stocks are Bright Scholar Education Holdings Limited (NYSE:BEDU), Plantronics, Inc. (NYSE:PLT), United Fire Group, Inc. (NASDAQ:UFCS), and Opera Limited (NASDAQ:OPRA). This group of stocks’ market values resemble TGS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BEDU | 8 | 87125 | -1 |
| PLT | 11 | 44533 | -2 |
| UFCS | 6 | 10537 | -3 |
| OPRA | 15 | 22844 | 2 |
| Average | 10 | 41260 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $25 million in TGS’s case. Opera Limited (NASDAQ:OPRA) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 6 bullish hedge fund positions. Transportadora de Gas del Sur SA (NYSE:TGS) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately TGS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TGS investors were disappointed as the stock returned -40.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
