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How Trecora Resources (TREC) Stacks Up Against Its Peers

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Trecora Resources (NYSE:TREC) .

Trecora Resources (NYSE:TREC) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. TREC was in 6 hedge funds’ portfolios at the end of the third quarter of 2016. 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 Heritage Oaks Bancorp (NASDAQ:HEOP), Orchids Paper Products Company (NYSEMKT:TIS), and Carolina Financial Corp (NASDAQ:CARO) to gather more data points.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Hedge fund activity in Trecora Resources (NYSE:TREC)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in TREC at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in Trecora Resources (NYSE:TREC), worth close to $6.4 million. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, holding a $2.5 million position. Some other members of the smart money that are bullish include D. E. Shaw’s D E Shaw, Nelson Obus’ Wynnefield Capital and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).

Let’s go over hedge fund activity in other stocks similar to Trecora Resources (NYSE:TREC). These stocks are Heritage Oaks Bancorp (NASDAQ:HEOP), Orchids Paper Products Company (NYSEMKT:TIS), Carolina Financial Corp (NASDAQ:CARO), and Vince Holding Corp (NYSE:VNCE). This group of stocks’ market values resemble TREC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HEOP 4 26403 -1
TIS 2 12263 -3
CARO 2 8642 0
VNCE 13 32250 -1

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $10 million in TREC’s case. Vince Holding Corp (NYSE:VNCE) is the most popular stock in this table. On the other hand Orchids Paper Products Company (NYSEMKT:TIS) is the least popular one with only 2 bullish hedge fund positions. Trecora Resources (NYSE:TREC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard VNCE might be a better candidate to consider taking a long position in.

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