How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding TriNet Group Inc (NYSE:TNET).
Is TriNet Group Inc (NYSE:TNET) a bargain? The smart money was in an optimistic mood. The number of long hedge fund positions moved up by 3 in recent months. TriNet Group Inc (NYSE:TNET) was in 24 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 27. Our calculations also showed that TNET isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
At the moment there are plenty of indicators stock market investors employ to appraise their stock investments. Some of the most underrated indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can trounce the S&P 500 by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Peter Algert of Algert Global
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Do Hedge Funds Think TNET Is A Good Stock To Buy Now?
At the end of March, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TNET over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TriNet Group Inc (NYSE:TNET) was held by Cantillon Capital Management, which reported holding $301.2 million worth of stock at the end of December. It was followed by Harbor Spring Capital with a $33.1 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Harbor Spring Capital allocated the biggest weight to TriNet Group Inc (NYSE:TNET), around 4.7% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, earmarking 2.19 percent of its 13F equity portfolio to TNET.
Consequently, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the most outsized position in TriNet Group Inc (NYSE:TNET). Millennium Management had $14.5 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Algert’s Algert Global, Donald Sussman’s Paloma Partners, and Jinghua Yan’s TwinBeech Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TriNet Group Inc (NYSE:TNET) but similarly valued. These stocks are Helen of Troy Limited (NASDAQ:HELE), The Ensign Group, Inc. (NASDAQ:ENSG), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), AMC Entertainment Holdings Inc (NYSE:AMC), Acadia Healthcare Company Inc (NASDAQ:ACHC), Atea Pharmaceuticals, Inc. (NASDAQ:AVIR), and Vontier Corporation (NYSE:VNT). This group of stocks’ market values resemble TNET’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HELE | 29 | 214080 | 10 |
| ENSG | 13 | 87836 | -6 |
| SPR | 44 | 1120191 | 3 |
| AMC | 19 | 34006 | 3 |
| ACHC | 30 | 525135 | 1 |
| AVIR | 13 | 1296595 | -1 |
| VNT | 38 | 786836 | 2 |
| Average | 26.6 | 580668 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $581 million. That figure was $389 million in TNET’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand The Ensign Group, Inc. (NASDAQ:ENSG) is the least popular one with only 13 bullish hedge fund positions. TriNet Group Inc (NYSE:TNET) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TNET is 52.4. 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 negative signal and 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately TNET wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TNET investors were disappointed as the stock returned -7.1% since the end of March (through 7/16) 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 most of these stocks already outperformed the market in 2021.
Follow Trinet Group Inc. (NYSE:TNET)
Follow Trinet Group Inc. (NYSE:TNET)
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Disclosure: None. This article was originally published at Insider Monkey.
