Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Talen Energy Corp (NYSE:TLN) a buy here? It looks like the best stock pickers are reducing their bets on the stock, as the number of long hedge fund bets that are revealed through the 13F filings fell by four during the third quarter. In this way, 20 funds tracked by Insider Monkey held shares of TLN at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cheetah Mobile Inc (ADR) (NYSE:CMCM), Select Medical Holdings Corporation (NYSE:SEM), and Monogram Residential Trust Inc (NYSE:MORE) to gather more data points.
Follow Talen Energy Corp (TSE:TLN)
Follow Talen Energy Corp (TSE:TLN)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s take a look at the recent action surrounding Talen Energy Corp (NYSE:TLN).
How have hedgies been trading Talen Energy Corp (NYSE:TLN)?
At the end of the third quarter, a total of 20 funds tracked by Insider Monkey held long positions in Talen Energy Corp, down by 17% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in TLN at the beginning of this year. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Paul Singer’s Elliott Management holds the most valuable position in Talen Energy Corp (NYSE:TLN). Elliott Management has a $80.6 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund is Robert Emil Zoellner of Alpine Associates, with a $25.7 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Phill Gross and Robert Atchinson’s Adage Capital Management, Tom Sandell’s Sandell Asset Management, and Neil Chriss’ Hutchin Hill Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually dropped their positions entirely. Interestingly, one of the biggest hedge funds in the world, Millennium Management, dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $22.4 million in stock, and John Orrico’s Water Island Capital was right behind this move, as the fund dumped about $9.5 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to Talen Energy Corp (NYSE:TLN). We will take a look at Cheetah Mobile Inc (ADR) (NYSE:CMCM), Select Medical Holdings Corporation (NYSE:SEM), Monogram Residential Trust Inc (NYSE:MORE), and Nexstar Broadcasting Group, Inc. (NASDAQ:NXST). This group of stocks’ market values are closest to TLN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMCM | 5 | 23052 | -1 |
| SEM | 13 | 412467 | -3 |
| MORE | 12 | 22361 | 0 |
| NXST | 45 | 889860 | 4 |
As you can see these stocks had an average of 19 funds with bullish positions and the average amount invested in these stocks was $337 million. That figure was $194 million in TLN’s case. Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (ADR) (NYSE:CMCM) is the least popular one with only five bullish hedge fund positions. Talen Energy Corp (NYSE:TLN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) might be a better candidate to consider taking a long position in.
Disclosure: none
