We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
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 TransUnion (NYSE:TRU) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
TransUnion (NYSE:TRU) has experienced a decrease in hedge fund sentiment in recent months. TRU was in 37 hedge funds’ portfolios at the end of December. There were 38 hedge funds in our database with TRU holdings at the end of the previous quarter. Our calculations also showed that TRU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we’re going to go over the recent hedge fund action surrounding TransUnion (NYSE:TRU).
What does smart money think about TransUnion (NYSE:TRU)?
At Q4’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in TRU a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in TransUnion (NYSE:TRU), which was worth $193.1 million at the end of the third quarter. On the second spot was D E Shaw which amassed $159.8 million worth of shares. Farallon Capital, Alkeon Capital 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 Lansing Management allocated the biggest weight to TransUnion (NYSE:TRU), around 18.24% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, setting aside 6.53 percent of its 13F equity portfolio to TRU.
Because TransUnion (NYSE:TRU) has experienced a decline in interest from hedge fund managers, it’s easy to see that there were a few hedgies who sold off their positions entirely in the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $39.3 million in stock, and Per Johansson’s Bodenholm Capital was right behind this move, as the fund dropped about $26.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to TransUnion (NYSE:TRU). These stocks are KB Financial Group, Inc. (NYSE:KB), Deutsche Bank AG (NYSE:DB), Tiffany & Co. (NYSE:TIF), and Discovery Communications Inc. (NASDAQ:DISCK). This group of stocks’ market values are closest to TRU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KB | 5 | 47584 | -3 |
| DB | 12 | 1010511 | 0 |
| TIF | 62 | 2223708 | 30 |
| DISCK | 33 | 948913 | 0 |
| Average | 28 | 1057679 | 6.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1058 million. That figure was $932 million in TRU’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 5 bullish hedge fund positions. TransUnion (NYSE:TRU) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on TRU, though not to the same extent, as the stock returned -23.1% during the first two and a half months of 2020 (through March 16th) and outperformed the market as well.
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.
