Hedge Funds Are Selling Turquoise Hill Resources Ltd (TRQ)

Is Turquoise Hill Resources Ltd (NYSE:TRQ) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Turquoise Hill Resources Ltd ready to rally soon? The smart money is in a pessimistic mood. The number of bullish hedge fund bets fell by 4 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Huntington Ingalls Industries Inc (NYSE:HII), The Ultimate Software Group, Inc. (NASDAQ:ULTI), and Lennox International Inc. (NYSE:LII) to gather more data points.

With all of this in mind, we’re going to view the latest action regarding Turquoise Hill Resources Ltd (NYSE:TRQ).

What have hedge funds been doing with Turquoise Hill Resources Ltd (NYSE:TRQ)?

Heading into Q4, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Pentwater Capital Management, managed by Matthew Halbower, holds the largest position in Turquoise Hill Resources Ltd (NYSE:TRQ). Pentwater Capital Management has a $297.6 million position in the stock, comprising 2.6% of its 13F portfolio. The second most bullish fund manager is Anchor Bolt Capital, managed by Robert Polak, which holds a $38.9 million position; 1.3% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Gifford Combs’ Dalton Investments, David Iben’s Kopernik Global Investors and Benjamin A. Smith’s Laurion Capital Management.

Seeing as Turquoise Hill Resources Ltd (NYSE:TRQ) has faced falling interest from the smart money, we can see that there exists a select few funds who were dropping their entire stakes last quarter. Interestingly, Kenneth Mario Garschina’s Mason Capital Management sold off the largest position of the 700 funds watched by Insider Monkey, totaling an estimated $88.4 million in stock. Matthew Knauer and Mina Faltas’s fund, Nokota Management, also dumped its stock, about $14.5 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Turquoise Hill Resources Ltd (NYSE:TRQ). These stocks are Huntington Ingalls Industries Inc (NYSE:HII), The Ultimate Software Group, Inc. (NASDAQ:ULTI), Lennox International Inc. (NYSE:LII), and Helmerich & Payne, Inc. (NYSE:HP). This group of stocks’ market values resemble TRQ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HII 32 495637 7
ULTI 16 192106 1
LII 20 130456 -5
HP 27 368613 3

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $425 million in TRQ’s case. Huntington Ingalls Industries Inc (NYSE:HII) is the most popular stock in this table. On the other hand The Ultimate Software Group, Inc. (NASDAQ:ULTI) is the least popular one with only 16 bullish hedge fund positions. Turquoise Hill Resources Ltd (NYSE:TRQ) 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. In this regard HII might be a better candidate to consider a long position.