Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Thermon Group Holdings, Inc. (NYSE:THR) based on that data and determine whether they were really smart about the stock.
Thermon Group Holdings, Inc. (NYSE:THR) has experienced a decrease in support from the world's most elite money managers lately. Our calculations also showed that THR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a peek at the recent hedge fund action encompassing Thermon Group Holdings, Inc. (NYSE:THR).
How are hedge funds trading Thermon Group Holdings, Inc. (NYSE:THR)?
Heading into the second quarter of 2020, a total of 11 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 8 hedge funds with a bullish position in THR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in Thermon Group Holdings, Inc. (NYSE:THR), worth close to $8.8 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Ian Simm of Impax Asset Management, with a $5.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of D. E. Shaw's D E Shaw, Peter Schliemann's Rutabaga Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to Thermon Group Holdings, Inc. (NYSE:THR), around 1.17% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to THR.
Due to the fact that Thermon Group Holdings, Inc. (NYSE:THR) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers who were dropping their entire stakes heading into Q4. At the top of the heap, Minhua Zhang's Weld Capital Management dumped the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $0.8 million in stock. Donald Sussman's fund, Paloma Partners, also dumped its stock, about $0.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Thermon Group Holdings, Inc. (NYSE:THR). These stocks are Atara Biotherapeutics Inc (NASDAQ:ATRA), MeiraGTx Holdings plc (NASDAQ:MGTX), ANI Pharmaceuticals Inc (NASDAQ:ANIP), and FutureFuel Corp. (NYSE:FF). This group of stocks' market caps match THR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATRA,17,220066,1 MGTX,17,170760,-4 ANIP,12,47914,-1 FF,11,45441,1 Average,14.25,121045,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $25 million in THR's case. Atara Biotherapeutics Inc (NASDAQ:ATRA) is the most popular stock in this table. On the other hand FutureFuel Corp. (NYSE:FF) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Thermon Group Holdings, Inc. (NYSE:THR) is even less popular than FF. Hedge funds dodged a bullet by taking a bearish stance towards THR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately THR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); THR investors were disappointed as the stock returned -3.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.