It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Tenneco Inc (NYSE:TEN).
Is Tenneco Inc (NYSE:TEN) a buy, sell, or hold? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions were trimmed by 3 in recent months. At the end of this article we will also compare TEN to other stocks including PDC Energy Inc (NASDAQ:PDCE), LaSalle Hotel Properties (NYSE:LHO), and Fitbit Inc (NYSE:FIT) to get a better sense of its popularity.
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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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How have hedgies been trading Tenneco Inc (NYSE:TEN)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 11% from one quarter earlier. Hedge fund ownership of the stock has trended down during each of the past three quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Principal Global Investors’ Columbus Circle Investors has the biggest position in Tenneco Inc (NYSE:TEN), worth close to $53.5 million. Coming in second is GAMCO Investors, managed by Mario Gabelli, which holds a $40.1 million position. Other hedge funds and institutional investors with similar optimism encompass Ric Dillon’s Diamond Hill Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Eric F. Billings’ Billings Capital Management.
Judging by the fact that Tenneco Inc (NYSE:TEN) has faced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of hedgies who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that D E Shaw dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $2.9 million in stock. Gregg Moskowitz’s fund, Interval Partners, also cut its stock, about $1.6 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tenneco Inc (NYSE:TEN) but similarly valued. These stocks are PDC Energy Inc (NASDAQ:PDCE), LaSalle Hotel Properties (NYSE:LHO), Fitbit Inc (NYSE:FIT), and Littelfuse, Inc. (NASDAQ:LFUS). All of these stocks’ market caps are closest to TEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PDCE | 22 | 278279 | 5 |
| LHO | 13 | 21906 | -1 |
| FIT | 35 | 442510 | 6 |
| LFUS | 14 | 178544 | 0 |
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $201 million in TEN’s case. Fitbit Inc (NYSE:FIT) is the most popular stock in this table. On the other hand LaSalle Hotel Properties (NYSE:LHO) is the least popular one with only 13 bullish hedge fund positions. Tenneco Inc (NYSE:TEN) 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 FIT might be a better candidate to consider a long position.
Disclosure: None
