Hedge Funds Are Dumping Trex Company, Inc. (TREX)

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Trex Company, Inc. (NYSE:TREX).

Is Trex Company, Inc. (NYSE:TREX) ready to rally soon? Investors who are in the know were turning less bullish. The number of bullish hedge fund positions dropped by 4 recently. Trex Company, Inc. (NYSE:TREX) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 30. Our calculations also showed that TREX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 25 hedge funds in our database with TREX positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to go over the new hedge fund action surrounding Trex Company, Inc. (NYSE:TREX).

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

Heading into the fourth quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in TREX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Montanaro Asset Management held the most valuable stake in Trex Company, Inc. (NYSE:TREX), which was worth $50.3 million at the end of the third quarter. On the second spot was Broad Bay Capital which amassed $47.9 million worth of shares. Citadel Investment Group, Driehaus Capital, and Renaissance Technologies 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 Montanaro Asset Management allocated the biggest weight to Trex Company, Inc. (NYSE:TREX), around 6.06% of its 13F portfolio. Broad Bay Capital is also relatively very bullish on the stock, setting aside 5.93 percent of its 13F equity portfolio to TREX.

Seeing as Trex Company, Inc. (NYSE:TREX) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings by the end of the third quarter. At the top of the heap, Andrew Sandler’s Sandler Capital Management sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $7.4 million in stock. Clint Carlson’s fund, Carlson Capital, also sold off its stock, about $3.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Trex Company, Inc. (NYSE:TREX) but similarly valued. We will take a look at Procore Technologies Inc. (NYSE:PCOR), Westlake Chemical Corporation (NYSE:WLK), Host Hotels and Resorts Inc (NASDAQ:HST), Darling Ingredients Inc. (NYSE:DAR), Dropbox, Inc. (NASDAQ:DBX), Globant SA (NYSE:GLOB), and Atmos Energy Corporation (NYSE:ATO). All of these stocks’ market caps match TREX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $716 million. That figure was $222 million in TREX’s case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NASDAQ:HST) is the least popular one with only 16 bullish hedge fund positions. Trex Company, Inc. (NYSE:TREX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TREX is 32. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on TREX as the stock returned 32.5% since the end of the third quarter (through 12/31) and outperformed the market by an even larger margin.

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