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Is THR A Good Stock To Buy Now?

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·6 min read
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In this article we will analyze whether Thermon Group Holdings, Inc. (NYSE:THR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is THR a good stock to buy now? Thermon Group Holdings, Inc. (NYSE:THR) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. THR investors should be aware of an increase in support from the world's most elite money managers lately. There were 12 hedge funds in our database with THR positions at the end of the second quarter. Our calculations also showed that THR isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's check out the new hedge fund action surrounding Thermon Group Holdings, Inc. (NYSE:THR).

Do Hedge Funds Think THR Is A Good Stock To Buy Now?

At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in THR over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is THR A Good Stock To Buy?
Is THR A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Thermon Group Holdings, Inc. (NYSE:THR), which was worth $4.9 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $4.3 million worth of shares. D E Shaw, Rutabaga Capital Management, and Arrowstreet Capital 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 Rutabaga Capital Management allocated the biggest weight to Thermon Group Holdings, Inc. (NYSE:THR), around 2.04% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, setting aside 1.62 percent of its 13F equity portfolio to THR.

As one would reasonably expect, specific money managers were leading the bulls' herd. Harvey Partners, managed by Jeffrey Moskowitz, established the most outsized position in Thermon Group Holdings, Inc. (NYSE:THR). Harvey Partners had $1.2 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also initiated a $0.2 million position during the quarter.

Let's now review hedge fund activity in other stocks similar to Thermon Group Holdings, Inc. (NYSE:THR). These stocks are Kamada Ltd (NASDAQ:KMDA), Valhi, Inc. (NYSE:VHI), WiMi Hologram Cloud Inc. (NASDAQ:WIMI), Wins Finance Holdings Inc. (NASDAQ:WINS), Tejon Ranch Company (NYSE:TRC), Vermilion Energy Inc (NYSE:VET), and Lawson Products, Inc. (NASDAQ:LAWS). 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 KMDA,6,13143,4 VHI,3,3064,-1 WIMI,3,1363,1 WINS,1,510,0 TRC,13,51914,2 VET,6,8820,-2 LAWS,5,26245,-2 Average,5.3,15008,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.3 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $25 million in THR's case. Tejon Ranch Company (NYSE:TRC) is the most popular stock in this table. On the other hand Wins Finance Holdings Inc. (NASDAQ:WINS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Thermon Group Holdings, Inc. (NYSE:THR) is more popular among hedge funds. Our overall hedge fund sentiment score for THR is 87. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on THR as the stock returned 40.6% since the end of September (through 12/8) 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.

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