Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Should You Buy Terex Corporation (TEX)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Terex Corporation (NYSE:TEX).

Is Terex Corporation (NYSE:TEX) a good investment today? The smart money is getting more optimistic. The number of bullish hedge fund bets rose by 3 recently. Our calculations also showed that TEX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the new hedge fund action encompassing Terex Corporation (NYSE:TEX).

How are hedge funds trading Terex Corporation (NYSE:TEX)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TEX over the last 18 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is TEX A Good Stock To Buy?

The largest stake in Terex Corporation (NYSE:TEX) was held by Pzena Investment Management, which reported holding $134.3 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $63 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Terex Corporation (NYSE:TEX), around 2.39% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 0.63 percent of its 13F equity portfolio to TEX.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Terex Corporation (NYSE:TEX) headfirst. Bronson Point Partners, managed by Larry Foley and Paul Farrell, initiated the biggest position in Terex Corporation (NYSE:TEX). Bronson Point Partners had $4.2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $4.2 million investment in the stock during the quarter. The other funds with brand new TEX positions are Joel Greenblatt’s Gotham Asset Management, Mika Toikka’s AlphaCrest Capital Management, and Ray Dalio’s Bridgewater Associates.

Let’s go over hedge fund activity in other stocks similar to Terex Corporation (NYSE:TEX). We will take a look at Heron Therapeutics Inc (NASDAQ:HRTX), Aimmune Therapeutics Inc (NASDAQ:AIMT), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), and Deluxe Corporation (NYSE:DLX). This group of stocks’ market values are similar to TEX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRTX 19 497040 3
AIMT 13 164507 -7
SAIL 25 250134 -1
DLX 29 162395 5
Average 21.5 268519 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $291 million in TEX’s case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand Aimmune Therapeutics Inc (NASDAQ:AIMT) is the least popular one with only 13 bullish hedge fund positions. Terex Corporation (NYSE:TEX) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately TEX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TEX were disappointed as the stock returned -51.1% during the same time period 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.