We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Terex Corporation (NYSE:TEX).
Is Terex Corporation (NYSE:TEX) a good investment today? The smart money is getting more optimistic. The number of bullish hedge fund bets rose by 3 recently. Our calculations also showed that TEX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard S. Pzena of Pzena Investment Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the new hedge fund action encompassing Terex Corporation (NYSE:TEX).
How are hedge funds trading Terex Corporation (NYSE:TEX)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TEX over the last 18 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Terex Corporation (NYSE:TEX) was held by Pzena Investment Management, which reported holding $134.3 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $63 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Terex Corporation (NYSE:TEX), around 2.39% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 0.63 percent of its 13F equity portfolio to TEX.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Terex Corporation (NYSE:TEX) headfirst. Bronson Point Partners, managed by Larry Foley and Paul Farrell, initiated the biggest position in Terex Corporation (NYSE:TEX). Bronson Point Partners had $4.2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $4.2 million investment in the stock during the quarter. The other funds with brand new TEX positions are Joel Greenblatt’s Gotham Asset Management, Mika Toikka’s AlphaCrest Capital Management, and Ray Dalio’s Bridgewater Associates.
Let’s go over hedge fund activity in other stocks similar to Terex Corporation (NYSE:TEX). We will take a look at Heron Therapeutics Inc (NASDAQ:HRTX), Aimmune Therapeutics Inc (NASDAQ:AIMT), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), and Deluxe Corporation (NYSE:DLX). This group of stocks’ market values are similar to TEX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRTX | 19 | 497040 | 3 |
| AIMT | 13 | 164507 | -7 |
| SAIL | 25 | 250134 | -1 |
| DLX | 29 | 162395 | 5 |
| Average | 21.5 | 268519 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $291 million in TEX’s case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand Aimmune Therapeutics Inc (NASDAQ:AIMT) is the least popular one with only 13 bullish hedge fund positions. Terex Corporation (NYSE:TEX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately TEX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TEX were disappointed as the stock returned -51.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
