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Did Hedge Funds Drop The Ball On Thor Industries, Inc. (THO) ?

Abigail Fisher

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Thor Industries, Inc. (NYSE:THO).

Thor Industries, Inc. (NYSE:THO) was in 22 hedge funds' portfolios at the end of the fourth quarter of 2018. THO shareholders have witnessed a decrease in support from the world's most elite money managers of late. There were 28 hedge funds in our database with THO holdings at the end of the previous quarter. Our calculations also showed that THO isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CHILTON INVESTMENT COMPANY

We're going to take a peek at the key hedge fund action regarding Thor Industries, Inc. (NYSE:THO).

How have hedgies been trading Thor Industries, Inc. (NYSE:THO)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in THO a year ago. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

THO_apr2019

More specifically, Chilton Investment Company was the largest shareholder of Thor Industries, Inc. (NYSE:THO), with a stake worth $38.2 million reported as of the end of September. Trailing Chilton Investment Company was Royce & Associates, which amassed a stake valued at $24.5 million. Southpoint Capital Advisors, Renaissance Technologies, and Gotham Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Since Thor Industries, Inc. (NYSE:THO) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of funds that slashed their entire stakes last quarter. At the top of the heap, Robert Bishop's Impala Asset Management said goodbye to the biggest position of the 700 funds followed by Insider Monkey, totaling about $29.5 million in stock, and Michael O'Keefe's 12th Street Asset Management was right behind this move, as the fund dropped about $25.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Thor Industries, Inc. (NYSE:THO) but similarly valued. We will take a look at UniFirst Corp (NYSE:UNF), Cabot Microelectronics Corporation (NASDAQ:CCMP), Allegheny Technologies Incorporated (NYSE:ATI), and Owens-Illinois Inc (NYSE:OI). This group of stocks' market valuations are similar to THO's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNF,14,152652,-2 CCMP,20,280850,1 ATI,24,270622,-3 OI,21,350797,4 Average,19.75,263730,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $140 million in THO's case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand UniFirst Corp (NYSE:UNF) is the least popular one with only 14 bullish hedge fund positions. Thor Industries, Inc. (NYSE:THO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on THO as the stock returned 32.5% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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