While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Terminix Global Holdings, Inc. (NYSE:TMX).
Is Terminix Global Holdings, Inc. (NYSE:TMX) the right pick for your portfolio? The smart money was reducing their bets on the stock. The number of bullish hedge fund positions went down by 3 in recent months. Terminix Global Holdings, Inc. (NYSE:TMX) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 42. Our calculations also showed that TMX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are many formulas market participants employ to evaluate publicly traded companies. A duo of the most underrated formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite money managers can outclass their index-focused peers by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the fresh hedge fund action encompassing Terminix Global Holdings, Inc. (NYSE:TMX).
Do Hedge Funds Think TMX Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in TMX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Iridian Asset Management held the most valuable stake in Terminix Global Holdings, Inc. (NYSE:TMX), which was worth $189.4 million at the end of the fourth quarter. On the second spot was Gates Capital Management which amassed $148.1 million worth of shares. Hawk Ridge Management, GAMCO Investors, and Ancora Advisors 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 Gates Capital Management allocated the biggest weight to Terminix Global Holdings, Inc. (NYSE:TMX), around 5.39% of its 13F portfolio. Iridian Asset Management is also relatively very bullish on the stock, designating 3.23 percent of its 13F equity portfolio to TMX.
Because Terminix Global Holdings, Inc. (NYSE:TMX) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few money managers that decided to sell off their positions entirely by the end of the first quarter. Interestingly, Doug Silverman and Alexander Klabin’s Senator Investment Group cut the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $51 million in stock. Alok Agrawal’s fund, Bloom Tree Partners, also dropped its stock, about $20.2 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Terminix Global Holdings, Inc. (NYSE:TMX). We will take a look at Sana Biotechnology, Inc. (NASDAQ:SANA), BWX Technologies Inc (NYSE:BWXT), Reynolds Consumer Products Inc. (NASDAQ:REYN), Silicon Laboratories (NASDAQ:SLAB), First American Financial Corp (NYSE:FAF), CACI International Inc (NYSE:CACI), and BOK Financial Corporation (NASDAQ:BOKF). This group of stocks’ market caps are closest to TMX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $380 million. That figure was $456 million in TMX’s case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Sana Biotechnology, Inc. (NASDAQ:SANA) is the least popular one with only 15 bullish hedge fund positions. Terminix Global Holdings, Inc. (NYSE:TMX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TMX is 56.6. 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 July 9th and beat the market again by 6.7 percentage points. Unfortunately TMX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TMX were disappointed as the stock returned 4.3% since the end of March (through 7/9) 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.
Follow Terminix Global Holdings Inc (NYSE:TMX)
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Disclosure: None. This article was originally published at Insider Monkey.