Is TREX Stock A Buy or Sell?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Trex Company, Inc. (NYSE:TREX).

Is TREX stock a buy? Trex Company, Inc. (NYSE:TREX) was in 30 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TREX has seen an increase in hedge fund interest of late. There were 26 hedge funds in our database with TREX positions at the end of the third quarter. Our calculations also showed that TREX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of metrics stock traders have at their disposal to analyze their holdings. A duo of the less known metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the broader indices by a superb amount (see the details here).

Andrew Sandler of Sandler Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s review the recent hedge fund action regarding Trex Company, Inc. (NYSE:TREX).

Do Hedge Funds Think TREX Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the third quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in TREX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in Trex Company, Inc. (NYSE:TREX) was held by Broad Bay Capital, which reported holding $107.2 million worth of stock at the end of December. It was followed by Montanaro Asset Management with a $43.3 million position. Other investors bullish on the company included Waratah Capital Advisors, Columbus Circle Investors, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to Trex Company, Inc. (NYSE:TREX), around 12.04% of its 13F portfolio. Montanaro Asset Management is also relatively very bullish on the stock, dishing out 7.3 percent of its 13F equity portfolio to TREX.

As aggregate interest increased, key money managers have jumped into Trex Company, Inc. (NYSE:TREX) headfirst. Montanaro Asset Management, managed by Charles Montanaro, established the most outsized position in Trex Company, Inc. (NYSE:TREX). Montanaro Asset Management had $43.3 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $20.3 million position during the quarter. The other funds with new positions in the stock are Andrew Sandler’s Sandler Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks similar to Trex Company, Inc. (NYSE:TREX). These stocks are Floor & Decor Holdings, Inc. (NYSE:FND), Teck Resources Ltd (NYSE:TECK), BanColombia S.A. (NYSE:CIB), American Airlines Group Inc (NASDAQ:AAL), Amedisys Inc (NASDAQ:AMED), Vistra Corp. (NYSE:VST), and Lear Corporation (NYSE:LEA). All of these stocks’ market caps resemble TREX’s market cap.

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As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $732 million. That figure was $314 million in TREX’s case. Vistra Corp. (NYSE:VST) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 4 bullish hedge fund positions. Trex Company, Inc. (NYSE:TREX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TREX is 76.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on TREX as the stock returned 20.7% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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