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 Tenneco Inc (NYSE:TEN).
Is Tenneco Inc (NYSE:TEN) the right investment to pursue these days? Prominent investors were becoming hopeful. The number of bullish hedge fund positions inched up by 1 lately. Tenneco Inc (NYSE:TEN) was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that TEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 26 hedge funds in our database with TEN holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Tenneco Inc (NYSE:TEN).
Thomas Claugus of GMT Capital
Do Hedge Funds Think TEN Is A Good Stock To Buy Now?
At the end of September, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in TEN a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Tenneco Inc (NYSE:TEN) was held by Two Sigma Advisors, which reported holding $19.1 million worth of stock at the end of September. It was followed by GMT Capital with a $17.4 million position. Other investors bullish on the company included Lonestar Capital Management, Renaissance Technologies, and D E Shaw. In terms of the portfolio weights assigned to each position Kent Lake Capital allocated the biggest weight to Tenneco Inc (NYSE:TEN), around 2.4% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, dishing out 1.54 percent of its 13F equity portfolio to TEN.
As aggregate interest increased, some big names were breaking ground themselves. Maple Rock Capital, managed by Len Kipp and Xavier Majic, initiated the largest position in Tenneco Inc (NYSE:TEN). Maple Rock Capital had $6.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Mika Toikka’s AlphaCrest Capital Management, and Jinghua Yan’s TwinBeech Capital.
Let’s check out hedge fund activity in other stocks similar to Tenneco Inc (NYSE:TEN). These stocks are Materialise NV (NASDAQ:MTLS), Federal Agricultural Mortgage Corp. (NYSE:AGM), Huron Consulting Group Inc. (NASDAQ:HURN), Icosavax Inc. (NASDAQ:ICVX), Ichor Holdings Ltd. (NASDAQ:ICHR), Donnelley Financial Solutions, Inc. (NYSE:DFIN), and Innoviva, Inc. (NASDAQ:INVA). This group of stocks’ market values are closest to TEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTLS | 9 | 147187 | -5 |
| AGM | 7 | 15521 | 0 |
| HURN | 10 | 29089 | 1 |
| ICVX | 10 | 488323 | 10 |
| ICHR | 22 | 84446 | 2 |
| DFIN | 21 | 168678 | 1 |
| INVA | 18 | 292175 | 4 |
| Average | 13.9 | 175060 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $131 million in TEN’s case. Ichor Holdings Ltd. (NASDAQ:ICHR) is the most popular stock in this table. On the other hand Federal Agricultural Mortgage Corp. (NYSE:AGM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Tenneco Inc (NYSE:TEN) is more popular among hedge funds. Our overall hedge fund sentiment score for TEN is 82.1. 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. 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 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Unfortunately TEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TEN were disappointed as the stock returned -24.5% since the end of the third quarter (through 12/9) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
