Hedge Funds Are Selling TETRA Technologies, Inc. (TTI)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding TETRA Technologies, Inc. (NYSE:TTI).

TETRA Technologies, Inc. (NYSE:TTI) shareholders have witnessed a decrease in hedge fund interest of late. TETRA Technologies, Inc. (NYSE:TTI) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 23. There were 22 hedge funds in our database with TTI positions at the end of the first quarter. Our calculations also showed that TTI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

With all of this in mind let’s check out the new hedge fund action regarding TETRA Technologies, Inc. (NYSE:TTI).

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

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TTI over the last 24 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is TTI A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Huber Capital Management, managed by Joe Huber, holds the number one position in TETRA Technologies, Inc. (NYSE:TTI). Huber Capital Management has a $7 million position in the stock, comprising 1.8% of its 13F portfolio. The second most bullish fund manager is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $5.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Israel Englander’s Millennium Management, Mike Masters’s Masters Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to TETRA Technologies, Inc. (NYSE:TTI), around 1.8% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, dishing out 0.84 percent of its 13F equity portfolio to TTI.

Seeing as TETRA Technologies, Inc. (NYSE:TTI) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of funds who were dropping their positions entirely heading into Q3. At the top of the heap, Jim Roumell’s Roumell Asset Management sold off the largest stake of the 750 funds tracked by Insider Monkey, valued at about $6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $1.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to TETRA Technologies, Inc. (NYSE:TTI). We will take a look at Barrett Business Services, Inc. (NASDAQ:BBSI), Naked Brand Group Limited (NASDAQ:NAKD), Orchard Therapeutics plc (NASDAQ:ORTX), The Hackett Group, Inc. (NASDAQ:HCKT), Kimball Electronics Inc (NASDAQ:KE), Applied Therapeutics, Inc. (NASDAQ:APLT), and Astronics Corporation (NASDAQ:ATRO). This group of stocks’ market values are similar to TTI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBSI 13 50506 4
NAKD 4 618 0
ORTX 13 136646 -4
HCKT 17 129725 3
KE 15 43821 2
APLT 9 129917 1
ATRO 19 95258 2
Average 12.9 83784 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $38 million in TTI’s case. Astronics Corporation (NASDAQ:ATRO) is the most popular stock in this table. On the other hand Naked Brand Group Limited (NASDAQ:NAKD) is the least popular one with only 4 bullish hedge fund positions. TETRA Technologies, Inc. (NYSE:TTI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TTI is 76.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately TTI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TTI were disappointed as the stock returned -21.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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