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In this article we will take a look at whether hedge funds think Ternium S.A. (NYSE:TX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is TX a good stock to buy now? Ternium S.A. (NYSE:TX) has experienced a decrease in support from the world's most elite money managers in recent months. Ternium S.A. (NYSE:TX) was in 8 hedge funds' portfolios at the end of September. The all time high for this statistics is 19. There were 9 hedge funds in our database with TX holdings at the end of June. Our calculations also showed that TX 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.
In today’s marketplace there are a multitude of formulas stock market investors can use to grade publicly traded companies. A couple of the less known formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top money managers can outclass the market by a solid amount (see the details here).
Peter Rathjens of Arrowstreet Capital
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 we're going to take a peek at the fresh hedge fund action encompassing Ternium S.A. (NYSE:TX).
What have hedge funds been doing with Ternium S.A. (NYSE:TX)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TX over the last 21 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Oldfield's Oldfield Partners has the biggest position in Ternium S.A. (NYSE:TX), worth close to $77.2 million, amounting to 8.3% of its total 13F portfolio. The second largest stake is held by Contrarian Capital, managed by Jon Bauer, which holds a $18.8 million position; 8% of its 13F portfolio is allocated to the company. Some other peers that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to Ternium S.A. (NYSE:TX), around 8.33% of its 13F portfolio. Contrarian Capital is also relatively very bullish on the stock, dishing out 8.01 percent of its 13F equity portfolio to TX.
Seeing as Ternium S.A. (NYSE:TX) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds who were dropping their positions entirely in the third quarter. Interestingly, D. E. Shaw's D E Shaw sold off the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $0.5 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also cut its stock, about $0.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Ternium S.A. (NYSE:TX). We will take a look at National Fuel Gas Company (NYSE:NFG), Ballard Power Systems Inc. (NASDAQ:BLDP), Turning Point Therapeutics, Inc. (NASDAQ:TPTX), Equitrans Midstream Corporation (NYSE:ETRN), Amicus Therapeutics, Inc. (NASDAQ:FOLD), ONE Gas Inc (NYSE:OGS), and Pilgrim's Pride Corporation (NASDAQ:PPC). This group of stocks' market caps are closest to TX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFG,16,110995,-6 BLDP,21,122657,5 TPTX,24,659001,-6 ETRN,25,432077,-4 FOLD,38,1192283,6 OGS,19,24291,-1 PPC,18,50121,3 Average,23,370204,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $370 million. That figure was $126 million in TX's case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand National Fuel Gas Company (NYSE:NFG) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Ternium S.A. (NYSE:TX) is even less popular than NFG. Our overall hedge fund sentiment score for TX is 16.6. 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. Hedge funds clearly dropped the ball on TX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on TX as the stock returned 49.7% since Q3 (through December 2nd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.