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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Tenneco Inc (NYSE:TEN)? The smart money sentiment can provide an answer to this question.
Tenneco Inc (NYSE:TEN) has seen an increase in enthusiasm from smart money of late. Tenneco Inc (NYSE:TEN) was in 28 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. There were 25 hedge funds in our database with TEN holdings at the end of December. Our calculations also showed that TEN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Bill Miller of Miller Value Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. Now let's check out the recent hedge fund action encompassing Tenneco Inc (NYSE:TEN).
Do Hedge Funds Think TEN Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in TEN a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Icahn Capital LP was the largest shareholder of Tenneco Inc (NYSE:TEN), with a stake worth $102.8 million reported as of the end of March. Trailing Icahn Capital LP was Lonestar Capital Management, which amassed a stake valued at $12.3 million. Two Sigma Advisors, Arrowstreet Capital, and Renaissance Technologies 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 Lonestar Capital Management allocated the biggest weight to Tenneco Inc (NYSE:TEN), around 2.51% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, designating 0.97 percent of its 13F equity portfolio to TEN.
Consequently, key hedge funds were breaking ground themselves. GMT Capital, managed by Thomas E. Claugus, assembled the biggest position in Tenneco Inc (NYSE:TEN). GMT Capital had $6.7 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $5.4 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, Bill Miller's Miller Value Partners, and Thyra Zerhusen's Fairpointe Capital.
Let's now take a look at hedge fund activity in other stocks similar to Tenneco Inc (NYSE:TEN). We will take a look at Chuy's Holdings Inc (NASDAQ:CHUY), Cars.com Inc. (NYSE:CARS), Shoe Carnival, Inc. (NASDAQ:SCVL), United Fire Group, Inc. (NASDAQ:UFCS), Village Farms International, Inc. (NASDAQ:VFF), Mohawk Group Holdings, Inc. (NASDAQ:MWK), and Hanger, Inc. (NYSE:HNGR). This group of stocks' market caps match TEN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHUY,8,54348,-5 CARS,18,154447,-1 SCVL,11,72384,0 UFCS,5,22792,-1 VFF,8,35566,2 MWK,12,70338,3 HNGR,11,52894,-4 Average,10.4,66110,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $196 million in TEN's case. Cars.com Inc. (NYSE:CARS) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Tenneco Inc (NYSE:TEN) is more popular among hedge funds. Our overall hedge fund sentiment score for TEN is 85.1. 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 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 24% in 2021 through July 9th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on TEN as the stock returned 78.2% since the end of March (through 7/9) 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.
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Disclosure: None. This article was originally published at Insider Monkey.