Were Hedge Funds Right About Trinseo S.A. (TSE)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Trinseo S.A. (NYSE:TSE) based on that data.

Trinseo S.A. (NYSE:TSE) has experienced an increase in enthusiasm from smart money of late. Trinseo S.A. (NYSE:TSE) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that TSE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Joel Greenblatt of Gotham Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the latest hedge fund action surrounding Trinseo S.A. (NYSE:TSE).

Do Hedge Funds Think TSE Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TSE over the last 23 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Trinseo S.A. (NYSE:TSE) was held by Balyasny Asset Management, which reported holding $13 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $9.9 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and GLG Partners. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Trinseo S.A. (NYSE:TSE), around 0.21% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to TSE.

Now, key hedge funds were leading the bulls’ herd. Navellier & Associates, managed by Louis Navellier, assembled the most valuable position in Trinseo S.A. (NYSE:TSE). Navellier & Associates had $1.2 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Joel Greenblatt’s Gotham Asset Management, Donald Sussman’s Paloma Partners, and Qing Li’s Sciencast Management.

Let’s check out hedge fund activity in other stocks similar to Trinseo S.A. (NYSE:TSE). These stocks are IGM Biosciences, Inc. (NASDAQ:IGMS), Forward Air Corporation (NASDAQ:FWRD), Golub Capital BDC Inc (NASDAQ:GBDC), Amarin Corporation plc (NASDAQ:AMRN), Gentherm Inc (NASDAQ:THRM), Essential Properties Realty Trust, Inc. (NYSE:EPRT), and Shenandoah Telecommunications Company (NASDAQ:SHEN). This group of stocks’ market valuations are closest to TSE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $51 million in TSE’s case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the least popular one with only 5 bullish hedge fund positions. Trinseo S.A. (NYSE:TSE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TSE is 55.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately TSE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TSE were disappointed as the stock returned -18.1% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.