The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Ternium S.A. (NYSE:TX), and what that likely means for the prospects of the company and its stock.
Ternium S.A. (NYSE:TX) investors should be aware of a decrease in support from the world’s most elite money managers recently. TX was in 14 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with TX positions at the end of the previous quarter. Our calculations also showed that TX isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to analyze the latest hedge fund action surrounding Ternium S.A. (NYSE:TX).
What have hedge funds been doing with Ternium S.A. (NYSE:TX)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in TX heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Contrarian Capital held the most valuable stake in Ternium S.A. (NYSE:TX), which was worth $67.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $16.4 million worth of shares. Moreover, Renaissance Technologies, Marshall Wace LLP, and HBK Investments were also bullish on Ternium S.A. (NYSE:TX), allocating a large percentage of their portfolios to this stock.
Due to the fact that Ternium S.A. (NYSE:TX) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there were a few fund managers that elected to cut their full holdings last quarter. Intriguingly, Louis Navellier’s Navellier & Associates cut the largest investment of all the hedgies followed by Insider Monkey, totaling close to $0.9 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund said goodbye to about $0.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ternium S.A. (NYSE:TX) but similarly valued. These stocks are Vectren Corporation (NYSE:VVC), Haemonetics Corporation (NYSE:HAE), Commscope Holding Company Inc (NASDAQ:COMM), and PacWest Bancorp (NASDAQ:PACW). This group of stocks’ market caps match TX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VVC | 19 | 553603 | 0 |
| HAE | 22 | 573018 | -2 |
| COMM | 31 | 1229371 | 4 |
| PACW | 26 | 253555 | 3 |
| Average | 24.5 | 652387 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $652 million. That figure was $129 million in TX’s case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand Vectren Corporation (NYSE:VVC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Ternium S.A. (NYSE:TX) is even less popular than VVC. 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.
Disclosure: None. This article was originally published at Insider Monkey.
