Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Terex Corporation (NYSE:TEX) was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2018. TEX investors should pay attention to a decrease in hedge fund sentiment of late. There were 21 hedge funds in our database with TEX positions at the end of the previous quarter. Our calculations also showed that TEX isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most shareholders, hedge funds are perceived as underperforming, old investment tools of the past. While there are over 8000 funds with their doors open today, Our experts hone in on the leaders of this group, approximately 750 funds. It is estimated that this group of investors handle the majority of the smart money’s total capital, and by watching their unrivaled picks, Insider Monkey has spotted many investment strategies that have historically defeated the market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a glance at the fresh hedge fund action regarding Terex Corporation (NYSE:TEX).
What have hedge funds been doing with Terex Corporation (NYSE:TEX)?
At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the second quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in TEX a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Terex Corporation (NYSE:TEX). Pzena Investment Management has a $89.7 million position in the stock, comprising 0.5% of its 13F portfolio. On Pzena Investment Management’s heels is Richard McGuire of Marcato Capital Management, with a $79.8 million position; the fund has 17.6% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Ken Fisher’s Fisher Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors and Kenneth Squire’s 13D Management.
Since Terex Corporation (NYSE:TEX) has experienced declining sentiment from the smart money, it’s easy to see that there exists a select few fund managers who sold off their positions entirely by the end of the third quarter. Intriguingly, David Harding’s Winton Capital Management dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $10 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $9.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 8 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 Terex Corporation (NYSE:TEX) but similarly valued. These stocks are The Ensign Group, Inc. (NASDAQ:ENSG), Chart Industries, Inc. (NASDAQ:GTLS), AppFolio Inc (NASDAQ:APPF), and Heron Therapeutics Inc (NASDAQ:HRTX). This group of stocks’ market caps resemble TEX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENSG | 18 | 62521 | 5 |
| GTLS | 15 | 264312 | -3 |
| APPF | 14 | 171232 | -5 |
| HRTX | 25 | 716009 | -6 |
| Average | 18 | 303519 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $258 million in TEX’s case. Heron Therapeutics Inc (NASDAQ:HRTX) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Terex Corporation (NYSE:TEX) is even less popular than APPF. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on TEX, though not to the same extent, as the stock returned 23.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
