Is TETRA Technologies, Inc. (TTI) Going to Burn These Hedge Funds?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like TETRA Technologies, Inc. (NYSE:TTI).

TETRA Technologies, Inc. (NYSE:TTI) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of September. At the end of this article we will also compare TTI to other stocks including ACM Research, Inc. (NASDAQ:ACMR), Silver Spike Acquisition Corp. (NASDAQ:SSPKU), and Geron Corporation (NASDAQ:GERN) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the key hedge fund action surrounding TETRA Technologies, Inc. (NYSE:TTI).

What have hedge funds been doing with TETRA Technologies, Inc. (NYSE:TTI)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in TTI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TTI A Good Stock To Buy?

More specifically, Prescott Group Capital Management was the largest shareholder of TETRA Technologies, Inc. (NYSE:TTI), with a stake worth $6.5 million reported as of the end of September. Trailing Prescott Group Capital Management was D E Shaw, which amassed a stake valued at $3 million. Renaissance Technologies, Alyeska Investment Group, and Fondren Management 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 Prescott Group Capital Management allocated the biggest weight to TETRA Technologies, Inc. (NYSE:TTI), around 1.98% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, designating 1.05 percent of its 13F equity portfolio to TTI.

Because TETRA Technologies, Inc. (NYSE:TTI) has faced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedge funds that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, David Harding’s Winton Capital Management sold off the biggest stake of the 750 funds tracked by Insider Monkey, totaling about $0 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $0 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to TETRA Technologies, Inc. (NYSE:TTI). We will take a look at ACM Research, Inc. (NASDAQ:ACMR), Silver Spike Acquisition Corp. (NASDAQ:SSPKU), Geron Corporation (NASDAQ:GERN), and PDL Community Bancorp (NASDAQ:PDLB). This group of stocks’ market caps are similar to TTI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACMR 10 10370 3
SSPKU 8 52323 8
GERN 1 106 -1
PDLB 2 3226 0
Average 5.25 16506 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $15 million in TTI’s case. ACM Research, Inc. (NASDAQ:ACMR) is the most popular stock in this table. On the other hand Geron Corporation (NASDAQ:GERN) is the least popular one with only 1 bullish hedge fund positions. TETRA Technologies, Inc. (NYSE:TTI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TTI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TTI were disappointed as the stock returned -38.8% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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