Do Hedge Funds Love Trecora Resources (TREC)?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Trecora Resources (NYSE:TREC) and see how the stock is affected by the recent hedge fund activity.

Trecora Resources (NYSE:TREC) investors should be aware of an increase in hedge fund sentiment in recent months. At the end of this article we will also compare TREC to other stocks including AV Homes Inc (NASDAQ:AVHI), Heritage Commerce Corp. (NASDAQ:HTBK), and Gladstone Commercial Corporation (NASDAQ:GOOD) to get a better sense of its popularity.

In today’s marketplace there are many gauges stock market investors put to use to evaluate publicly traded companies. A duo of the best gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a very impressive amount (see the details here).

With all of this in mind, let’s review the fresh action surrounding Trecora Resources (NYSE:TREC).

Hedge fund activity in Trecora Resources (NYSE:TREC)

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Trecora Resources (NYSE:TREC). Royce & Associates has a $3.9 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is Hawk Ridge Management, led by David Brown, holding a $3.3 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Jim Simons’s Renaissance Technologies, Amy Minella’s Cardinal Capital and Ken Gray and Steve Walsh’s Bryn Mawr Capital.

Now, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in Trecora Resources (NYSE:TREC). Millennium Management had $0.3 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Trecora Resources (NYSE:TREC) but similarly valued. These stocks are AV Homes Inc (NASDAQ:AVHI), Heritage Commerce Corp. (NASDAQ:HTBK), Gladstone Commercial Corporation (NASDAQ:GOOD), and Green Bancorp Inc (NASDAQ:GNBC). This group of stocks’ market caps match TREC’s market cap.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $11 million in TREC’s case. AV Homes Inc (NASDAQ:AVHI) is the most popular stock in this table. On the other hand Gladstone Commercial Corporation (NASDAQ:GOOD) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Trecora Resources (NYSE:TREC) is as less popular as GOOD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.