Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Teradyne, Inc. (NASDAQ:TER).
Is TER stock a buy or sell? Teradyne, Inc. (NASDAQ:TER) was in 47 hedge funds’ portfolios at the end of December. The all time high for this statistic is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TER has seen an increase in hedge fund interest lately. There were 42 hedge funds in our database with TER positions at the end of the third quarter. Our calculations also showed that TER isn’t among the 30 most popular stocks among hedge funds (click for Q4 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. 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 124 percentage points since March 2017 (see the details here).
David Siegel of Two Sigma Advisors
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Do Hedge Funds Think TER Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TER over the last 22 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 Teradyne, Inc. (NASDAQ:TER) was held by Alkeon Capital Management, which reported holding $396.3 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $194.2 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Newbrook Capital Advisors allocated the biggest weight to Teradyne, Inc. (NASDAQ:TER), around 2.79% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, setting aside 1.3 percent of its 13F equity portfolio to TER.
With a general bullishness amongst the heavyweights, some big names have jumped into Teradyne, Inc. (NASDAQ:TER) headfirst. Newbrook Capital Advisors, managed by Robert Boucai, initiated the largest position in Teradyne, Inc. (NASDAQ:TER). Newbrook Capital Advisors had $46.4 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also initiated a $5.7 million position during the quarter. The other funds with brand new TER positions are Mark Coe’s Intrinsic Edge Capital, Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management, and Robert Charles Gibbins’s Autonomy Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Teradyne, Inc. (NASDAQ:TER) but similarly valued. These stocks are POSCO (NYSE:PKX), Laboratory Corp. of America Holdings (NYSE:LH), Vulcan Materials Company (NYSE:VMC), Fifth Third Bancorp (NASDAQ:FITB), BioNTech SE (NASDAQ:BNTX), International Paper Company (NYSE:IP), and Northern Trust Corporation (NASDAQ:NTRS). This group of stocks’ market values are closest to TER’s market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PKX,10,130115,-1 LH,66,1873964,9 VMC,44,1337772,2 FITB,43,506319,13 BNTX,17,170450,0 IP,31,167610,-1 NTRS,31,388257,3 Average,34.6,653498,3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $653 million. That figure was $1418 million in TER’s case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 10 bullish hedge fund positions. Teradyne, Inc. (NASDAQ:TER) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TER is 73. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately TER wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on TER were disappointed as the stock returned -4.1% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.