Tootsie Roll Industries, Inc. (TR): Are Hedge Funds Right About This Stock?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Tootsie Roll Industries, Inc. (NYSE:TR).

Hedge fund interest in Tootsie Roll Industries, Inc. (NYSE:TR) shares was flat at the end of last quarter, with 13 hedge funds in our database with TR holdings This is usually a negative indicator. At the end of this article we will also compare TR to other stocks including Knight Transportation (NYSE:KNX), WP Glimcher Inc (NYSE:WPG), and Armstrong World Industries, Inc. (NYSE:AWI) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Hedge fund activity in Tootsie Roll Industries, Inc. (NYSE:TR)

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 11 hedge funds with a bullish position in TR at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, led by Mario Gabelli, holds the largest position in Tootsie Roll Industries, Inc. (NYSE:TR). GAMCO Investors has a $46.3 million position in the stock. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $28 million position. Remaining members of the smart money that are bullish include John D. Gillespie’s Prospector Partners, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Tootsie Roll Industries, Inc. (NYSE:TR) has encountered falling interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Interestingly, Joel Greenblatt’s Gotham Asset Management got rid of the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth about $0.3 million in stock. Adam Wright and Gary Kohler’s fund, Blue Clay Capital, also dumped its call options, about $0.1 million worth.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tootsie Roll Industries, Inc. (NYSE:TR) but similarly valued. We will take a look at Knight Transportation (NYSE:KNX), WP Glimcher Inc (NYSE:WPG), Armstrong World Industries, Inc. (NYSE:AWI), and Washington Real Estate Investment Trust (NYSE:WRE). This group of stocks’ market caps are similar to TR’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $94 million in TR’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Knight Transportation (NYSE:KNX) is the least popular one with only 9 bullish hedge fund positions. Tootsie Roll Industries, Inc. (NYSE:TR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AWI might be a better candidate to consider taking a long position in.

Disclosure: None