Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Ternium S.A. (ADR) (NYSE:TX).
Ternium S.A. (ADR) (NYSE:TX) investors should pay attention to an increase in hedge fund interest lately. At the end of this article we will also compare TX to other stocks including Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Cable One Inc (NYSE:CABO), and Fortress Investment Group LLC (NYSE:FIG) to get a better sense of its popularity.
Follow Ternium S A (NYSE:TX)
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With all of this in mind, let’s go over the fresh action surrounding Ternium S.A. (ADR) (NYSE:TX).
How are hedge funds trading Ternium S.A. (ADR) (NYSE:TX)?
Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Alan Howard’s Brevan Howard has the largest position in Ternium S.A. (ADR) (NYSE:TX), worth close to $9.5 million, amounting to 4.8% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, holding a $5.5 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Israel Englander’s Millennium Management, Jim Simons’s Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Ternium S.A. (ADR) (NYSE:TX). Arrowstreet Capital had $0.9 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ternium S.A. (ADR) (NYSE:TX) but similarly valued. These stocks are Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Cable One Inc (NYSE:CABO), Fortress Investment Group LLC (NYSE:FIG), and AMC Entertainment Holdings Inc (NYSE:AMC). 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 |
|---|---|---|---|
| TTWO | 35 | 905047 | -5 |
| CABO | 25 | 274746 | 22 |
| FIG | 21 | 144098 | 3 |
| AMC | 20 | 77673 | -2 |
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $28 million in TX’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand AMC Entertainment Holdings Inc (NYSE:AMC) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Ternium S.A. (ADR) (NYSE:TX) is even less popular than AMC. 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.
