Hedge Funds Are Cashing Out Of Tenneco Inc (TEN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Tenneco Inc (NYSE:TEN)?

Tenneco Inc (NYSE:TEN) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. TEN was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with TEN positions at the end of the previous quarter. Our calculations also showed that TEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Andy Redleaf of Whitebox Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Tenneco Inc (NYSE:TEN).

What does smart money think about Tenneco Inc (NYSE:TEN)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the fourth quarter of 2019. By comparison, 26 hedge funds held shares or bullish call options in TEN a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in Tenneco Inc (NYSE:TEN) was held by Icahn Capital LP, which reported holding $20.3 million worth of stock at the end of September. It was followed by Lyrical Asset Management with a $9.3 million position. Other investors bullish on the company included Alta Fundamental Advisers, Millennium Management, and Whitebox Advisors. In terms of the portfolio weights assigned to each position Alta Fundamental Advisers allocated the biggest weight to Tenneco Inc (NYSE:TEN), around 3.9% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, setting aside 0.23 percent of its 13F equity portfolio to TEN.

Judging by the fact that Tenneco Inc (NYSE:TEN) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely by the end of the first quarter. Intriguingly, Renaissance Technologies dropped the biggest position of the 750 funds watched by Insider Monkey, worth close to $4.9 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund dumped about $0.8 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tenneco Inc (NYSE:TEN) but similarly valued. These stocks are Tsakos Energy Navigation Ltd. (NYSE:TNP), Benefitfocus Inc (NASDAQ:BNFT), GasLog Ltd (NYSE:GLOG), and Cheetah Mobile Inc (NYSE:CMCM). All of these stocks’ market caps match TEN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $41 million in TEN’s case. Tsakos Energy Navigation Ltd. (NYSE:TNP) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Tenneco Inc (NYSE:TEN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on TEN as the stock returned 120.6% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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