Here is What Hedge Funds Think About Valhi, Inc. (VHI)

Insider Monkey finished processing more than 700 13F filings made by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30. In this article we are going to take a look at smart money sentiment towards Valhi, Inc. (NYSE:VHI).

Valhi, Inc. (NYSE:VHI) was in 4 hedge funds’ portfolios at the end of September. VHI has seen a decrease in hedge fund sentiment of late. There were 6 hedge funds in our database with VHI positions at the end of the previous quarter. At the end of this article we will also compare VHI to other stocks, including Windstream Corporation (NASDAQ:WIN), Universal Electronics Inc (NASDAQ:UEIC), and IAMGOLD Corporation (USA) (NYSE:IAG) to get a better sense of its popularity.

If you’d ask most stock holders, hedge funds are assumed to be underperforming, old financial vehicles of years past. While there are greater than an 8000 funds in operation today, We choose to focus on the leaders of this group, about 700 funds. It is estimated that this group of investors administer most of the hedge fund industry’s total capital, and by watching their highest performing equity investments, Insider Monkey has deciphered numerous investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to check out the recent action surrounding Valhi, Inc. (NYSE:VHI).

How are hedge funds trading Valhi, Inc. (NYSE:VHI)?

Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the second quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Brian Taylor’s Pine River Capital Management has the biggest position in Valhi, Inc. (NYSE:VHI), worth close to $0.3 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Force Capital, led by Robert Jaffe, holding a $0.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Jim Simons’ Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

Since Valhi, Inc. (NYSE:VHI) has faced bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of funds that decided to sell off their positions entirely in the third quarter. Interestingly, Jay Petschek and Steven Major’s Corsair Capital Management sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $0.2 million in stock, and Murray Stahl’s Horizon Asset Management was right behind this move, as the fund dumped about $0.1 million worth of shares. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Valhi, Inc. (NYSE:VHI) but similarly valued. We will take a look at Windstream Corporation (NASDAQ:WIN), Universal Electronics Inc (NASDAQ:UEIC), IAMGOLD Corporation (USA) (NYSE:IAG), and The Rubicon Project Inc (NYSE:RUBI). All of these stocks’ market caps resemble VHI’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $41 million, compared to just $1 million in VHI’s case. The Rubicon Project Inc (NYSE:RUBI) is the most popular stock in this table. On the other hand IAMGOLD Corporation (USA) (NYSE:IAG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Valhi, Inc. (NYSE:VHI) is even less popular than IAG. 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.