These Hedge Funds Were Wrong About Piling Into Thor Industries, Inc. (THO)
In this article we will take a look at whether hedge funds think Thor Industries,…
In this article we will take a look at whether hedge funds think Thor Industries, Inc. (NYSE:THO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Thor Industries, Inc. (NYSE:THO) a buy here? The best stock pickers were taking an optimistic view. The number of bullish hedge fund positions advanced by 19 in recent months. Thor Industries, Inc. (NYSE:THO) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 42. Our calculations also showed that THO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: 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 S&P 500 ETFs by 58 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 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.
Brad Farber of Atika Capital
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 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a look at the new hedge fund action surrounding Thor Industries, Inc. (NYSE:THO).
How are hedge funds trading Thor Industries, Inc. (NYSE:THO)?
At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 95% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in THO a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Scopus Asset Management was the largest shareholder of Thor Industries, Inc. (NYSE:THO), with a stake worth $49.3 million reported as of the end of June. Trailing Scopus Asset Management was Marshall Wace LLP, which amassed a stake valued at $44.8 million. Citadel Investment Group, Capital Growth Management, and Atika Capital 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 Value Holdings LP allocated the biggest weight to Thor Industries, Inc. (NYSE:THO), around 7.32% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, designating 3.34 percent of its 13F equity portfolio to THO.
As aggregate interest increased, specific money managers were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, created the largest position in Thor Industries, Inc. (NYSE:THO). Scopus Asset Management had $49.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $44.8 million position during the quarter. The other funds with brand new THO positions are Ken Heebner’s Capital Growth Management, D. E. Shaw’s D E Shaw, and Richard S. Meisenberg’s ACK Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Thor Industries, Inc. (NYSE:THO) but similarly valued. These stocks are Berry Global Group Inc (NYSE:BERY), Axon Enterprise, Inc. (NASDAQ:AAXN), Farfetch Limited (NYSE:FTCH), Donaldson Company, Inc. (NYSE:DCI), Sensata Technologies Holding plc (NYSE:ST), Santander Consumer USA Holdings Inc (NYSE:SC), and Bunge Limited (NYSE:BG). This group of stocks’ market caps resemble THO’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BERY,40,1455029,6 AAXN,39,609333,13 FTCH,37,837456,15 DCI,27,226099,7 ST,33,1073165,7 SC,20,561451,0 BG,37,620306,-2 Average,33.3,768977,6.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $769 million. That figure was $302 million in THO’s case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Santander Consumer USA Holdings Inc (NYSE:SC) is the least popular one with only 20 bullish hedge fund positions. Thor Industries, Inc. (NYSE:THO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for THO is 85.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately THO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on THO were disappointed as the stock returned -20.2% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Get real-time email alerts: Follow Thor Industries Inc (NYSE:THO)
Disclosure: None. This article was originally published at Insider Monkey.