Did Hedge Funds Make The Right Call On Tronox Holdings Plc (TROX) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtTronox Holdings Plc (NYSE:TROX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Tronox Holdings Plc (NYSE:TROX) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. TROX investors should pay attention to a decrease in hedge fund sentiment recently. There were 23 hedge funds in our database with TROX positions at the end of the previous quarter. Our calculations also showed that TROX 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.


Louis Bacon Moore of Moore Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a gander at the fresh hedge fund action surrounding Tronox Holdings Plc (NYSE:TROX).

How have hedgies been trading Tronox Holdings Plc (NYSE:TROX)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the fourth quarter of 2019. By comparison, 24 hedge funds held shares or bullish call options in TROX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TROX A Good Stock To Buy?

The largest stake in Tronox Holdings Plc (NYSE:TROX) was held by Maple Rock Capital, which reported holding $17.2 million worth of stock at the end of September. It was followed by Private Capital Management with a $13.6 million position. Other investors bullish on the company included Luminus Management, Appian Way Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Maple Rock Capital allocated the biggest weight to Tronox Holdings Plc (NYSE:TROX), around 4.41% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, setting aside 4.26 percent of its 13F equity portfolio to TROX.

Seeing as Tronox Holdings Plc (NYSE:TROX) has witnessed declining sentiment from the smart money, it’s safe to say that there was a specific group of funds that elected to cut their full holdings last quarter. Intriguingly, Robert Pohly’s Samlyn Capital said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $16.3 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund dumped about $4.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Tronox Holdings Plc (NYSE:TROX). These stocks are AudioCodes Ltd. (NASDAQ:AUDC), EverQuote, Inc. (NASDAQ:EVER), Veritex Holdings Inc (NASDAQ:VBTX), and INMODE LTD. (NASDAQ:INMD). All of these stocks’ market caps match TROX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUDC 10 37318 1
EVER 23 110730 4
VBTX 9 34975 -1
INMD 11 59841 4
Average 13.25 60716 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $52 million in TROX’s case. EverQuote, Inc. (NASDAQ:EVER) is the most popular stock in this table. On the other hand Veritex Holdings Inc (NASDAQ:VBTX) is the least popular one with only 9 bullish hedge fund positions. Tronox Holdings Plc (NYSE:TROX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on TROX as the stock returned 63.5% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Tronox Holdings Plc (NYSE:TROX)

Disclosure: None. This article was originally published at Insider Monkey.