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Hedge Funds Are Selling Tootsie Roll Industries, Inc. (TR)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Tootsie Roll Industries, Inc. (NYSE:TR) based on that data.

Tootsie Roll Industries, Inc. (NYSE:TR) was in 14 hedge funds’ portfolios at the end of March. TR has experienced a decrease in support from the world’s most elite money managers in recent months. There were 17 hedge funds in our database with TR positions at the end of the previous quarter. Our calculations also showed that TR 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.

In the eyes of most traders, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are greater than 8000 funds in operation today, Our researchers look at the leaders of this group, around 850 funds. It is estimated that this group of investors handle most of the smart money’s total capital, and by tracking their inimitable investments, Insider Monkey has unsheathed numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the fresh hedge fund action regarding Tootsie Roll Industries, Inc. (NYSE:TR).

How are hedge funds trading Tootsie Roll Industries, Inc. (NYSE:TR)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TR over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is TR A Good Stock To Buy?

More specifically, GAMCO Investors was the largest shareholder of Tootsie Roll Industries, Inc. (NYSE:TR), with a stake worth $31.7 million reported as of the end of September. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $12.2 million. Royce & Associates, Marshall Wace LLP, and Citadel Investment Group 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 Wallace Capital Management allocated the biggest weight to Tootsie Roll Industries, Inc. (NYSE:TR), around 0.52% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 0.41 percent of its 13F equity portfolio to TR.

Judging by the fact that Tootsie Roll Industries, Inc. (NYSE:TR) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers that slashed their entire stakes in the first quarter. Intriguingly, Noam Gottesman’s GLG Partners dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $0.5 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $0.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds in the first quarter.

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. These stocks are Western Gas Partners, LP (NYSE:WES), Amarin Corporation plc (NASDAQ:AMRN), HB Fuller Co (NYSE:FUL), and Columbia Property Trust Inc (NYSE:CXP). This group of stocks’ market caps are similar to TR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WES 12 27993 -1
AMRN 39 328086 3
FUL 18 124227 4
CXP 17 50559 -5
Average 21.5 132716 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $68 million in TR’s case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Western Gas Partners, LP (NYSE:WES) is the least popular one with only 12 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. 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately TR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TR investors were disappointed as the stock returned -6.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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