Valhi, Inc. (VHI): Are Hedge Funds Right About This Stock?

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Valhi, Inc. (NYSE:VHI) was in 5 hedge funds’ portfolio at the end of the fourth quarter of 2012. VHI shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 3 hedge funds in our database with VHI positions at the end of the previous quarter.

In the eyes of most investors, hedge funds are assumed to be worthless, outdated investment vehicles of years past. While there are over 8000 funds with their doors open today, we at Insider Monkey look at the aristocrats of this group, close to 450 funds. Most estimates calculate that this group oversees the majority of the hedge fund industry’s total asset base, and by tracking their best stock picks, we have figured out a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Equally as important, optimistic insider trading activity is a second way to parse down the investments you’re interested in. There are lots of motivations for a bullish insider to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this strategy if you understand where to look (learn more here).

Now, we’re going to take a glance at the latest action encompassing Valhi, Inc. (NYSE:VHI).

Hedge fund activity in Valhi, Inc. (NYSE:VHI)

At year’s end, a total of 5 of the hedge funds we track were long in this stock, a change of 67% from one quarter earlier. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully.

Valhi, Inc. (NYSE:VHI)Of the funds we track, Horizon Asset Management, managed by Murray Stahl, holds the most valuable position in Valhi, Inc. (NYSE:VHI). Horizon Asset Management has a $4.1 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which held a $1.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Dwight Anderson’s Ospraie Management.

Consequently, some big names have jumped into Valhi, Inc. (NYSE:VHI) headfirst. D E Shaw, managed by D. E. Shaw, established the largest position in Valhi, Inc. (NYSE:VHI). D E Shaw had 0.3 million invested in the company at the end of the quarter. Dwight Anderson’s Ospraie Management also initiated a $0.2 million position during the quarter.

What do corporate executives and insiders think about Valhi, Inc. (NYSE:VHI)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in focus has experienced transactions within the past half-year. Over the latest six-month time frame, Valhi, Inc. (NYSE:VHI) has experienced 1 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Valhi, Inc. (NYSE:VHI). These stocks are FMC Corp (NYSE:FMC), Celanese Corporation (NYSE:CE), Huntsman Corporation (NYSE:HUN), Ashland Inc. (NYSE:ASH), and Braskem SA (ADR) (NYSE:BAK). This group of stocks are in the chemicals – major diversified industry and their market caps match VHI’s market cap.

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