In this article we are going to use hedge fund sentiment as a tool and determine whether Tronox Holdings Plc (NYSE:TROX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Tronox Holdings Plc (NYSE:TROX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 36 hedge funds’ portfolios at the end of June. Our calculations also showed that TROX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cassava Sciences, Inc. (NASDAQ:SAVA), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and Apple Hospitality REIT Inc (NYSE:APLE) to gather more data points.
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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a glance at the key hedge fund action regarding Tronox Holdings Plc (NYSE:TROX).
Do Hedge Funds Think TROX Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TROX over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Maple Rock Capital was the largest shareholder of Tronox Holdings Plc (NYSE:TROX), with a stake worth $62.5 million reported as of the end of June. Trailing Maple Rock Capital was Luminus Management, which amassed a stake valued at $41.3 million. Impala Asset Management, Rubric Capital Management, and Private Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Maple Rock Capital allocated the biggest weight to Tronox Holdings Plc (NYSE:TROX), around 9.39% of its 13F portfolio. SCW Capital Management is also relatively very bullish on the stock, earmarking 8.25 percent of its 13F equity portfolio to TROX.
Due to the fact that Tronox Holdings Plc (NYSE:TROX) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds who were dropping their entire stakes heading into Q3. Interestingly, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners dropped the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $1.8 million in stock. Frank Fu’s fund, CaaS Capital, also sold off its stock, about $1.3 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Tronox Holdings Plc (NYSE:TROX). We will take a look at Cassava Sciences, Inc. (NASDAQ:SAVA), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Apple Hospitality REIT Inc (NYSE:APLE), Taylor Morrison Home Corp (NYSE:TMHC), Bank of Hawaii Corporation (NYSE:BOH), Haemonetics Corporation (NYSE:HAE), and Turquoise Hill Resources Ltd (NYSE:TRQ). This group of stocks’ market values are similar to TROX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAVA | 13 | 52698 | 8 |
| CSOD | 25 | 818761 | -3 |
| APLE | 16 | 243697 | -1 |
| TMHC | 23 | 203010 | 1 |
| BOH | 15 | 42233 | 0 |
| HAE | 30 | 392886 | -7 |
| TRQ | 11 | 620309 | -2 |
| Average | 19 | 339085 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $353 million in TROX’s case. Haemonetics Corporation (NYSE:HAE) is the most popular stock in this table. On the other hand Turquoise Hill Resources Ltd (NYSE:TRQ) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Tronox Holdings Plc (NYSE:TROX) is more popular among hedge funds. Our overall hedge fund sentiment score for TROX is 85. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 21.8% in 2021 through October 11th but still managed to beat the market by 4.4 percentage points. Hedge funds were also right about betting on TROX as the stock returned 11.7% since the end of June (through 10/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Tronox Holdings Plc (NYSE:TROX)
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Disclosure: None. This article was originally published at Insider Monkey.
