In this article we are going to use hedge fund sentiment as a tool and determine whether Tenneco Inc (NYSE:TEN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is TEN a good stock to buy? Tenneco Inc (NYSE:TEN) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Tenneco Inc (NYSE:TEN) was in 26 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 31. There were 28 hedge funds in our database with TEN positions at the end of the first quarter. Our calculations also showed that TEN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now we’re going to take a look at the recent hedge fund action encompassing Tenneco Inc (NYSE:TEN).
Do Hedge Funds Think TEN Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TEN over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tenneco Inc (NYSE:TEN) was held by GMT Capital, which reported holding $40.6 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $31 million position. Other investors bullish on the company included Two Sigma Advisors, Lonestar Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Tenneco Inc (NYSE:TEN), around 3.03% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, earmarking 2.84 percent of its 13F equity portfolio to TEN.
Since Tenneco Inc (NYSE:TEN) has witnessed falling interest from hedge fund managers, we can see that there lies a certain “tier” of funds that elected to cut their positions entirely last quarter. Intriguingly, Carl Icahn’s Icahn Capital LP dropped the largest stake of the 750 funds watched by Insider Monkey, worth close to $102.8 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tenneco Inc (NYSE:TEN) but similarly valued. These stocks are Sturm, Ruger & Company (NYSE:RGR), Danaos Corporation (NYSE:DAC), Primoris Services Corp (NASDAQ:PRIM), Heron Therapeutics Inc (NASDAQ:HRTX), Cortexyme, Inc. (NASDAQ:CRTX), Forterra, Inc. (NASDAQ:FRTA), and COMPASS Pathways Plc (NASDAQ:CMPS). All of these stocks’ market caps resemble TEN’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 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $219 million in TEN’s case. Sturm, Ruger & Company (NYSE:RGR) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Tenneco Inc (NYSE:TEN) is more popular among hedge funds. Our overall hedge fund sentiment score for TEN is 78.2. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately TEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TEN were disappointed as the stock returned -24.8% since the end of the second quarter (through 10/15) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.