Did The Smart Money Play Teradyne, Inc. (TER) Correctly?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Teradyne, Inc. (NASDAQ:TER) based on that data and determine whether they were really smart about the stock.

Teradyne, Inc. (NASDAQ:TER) was in 42 hedge funds’ portfolios at the end of September. The all time high for this statistic is 47. TER investors should be aware of a decrease in support from the world’s most elite money managers of late. There were 44 hedge funds in our database with TER positions at the end of the second quarter. Our calculations also showed that TER isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s take a peek at the recent hedge fund action surrounding Teradyne, Inc. (NASDAQ:TER).

Cathie Wood of ARK Investment Management

Do Hedge Funds Think TER Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2021. By comparison, 42 hedge funds held shares or bullish call options in TER a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Panayotis Takis Sparaggis’s Alkeon Capital Management has the number one position in Teradyne, Inc. (NASDAQ:TER), worth close to $433.7 million, corresponding to 0.7% of its total 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $138.9 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism contain Michael Rockefeller and KarláKroeker’s Woodline Partners, D. E. Shaw’s D E Shaw and Catherine D. Wood’s ARK Investment Management. In terms of the portfolio weights assigned to each position Force Hill Capital Management allocated the biggest weight to Teradyne, Inc. (NASDAQ:TER), around 2.94% of its 13F portfolio. Woodline Partners is also relatively very bullish on the stock, setting aside 2.15 percent of its 13F equity portfolio to TER.

Due to the fact that Teradyne, Inc. (NASDAQ:TER) has experienced declining sentiment from hedge fund managers, logic holds that there is a sect of hedge funds that slashed their positions entirely by the end of the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group cut the biggest position of the 750 funds tracked by Insider Monkey, valued at about $544.4 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $244.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Teradyne, Inc. (NASDAQ:TER) but similarly valued. These stocks are Lyft, Inc. (NASDAQ:LYFT), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), NICE Ltd (NASDAQ:NICE), Companhia Paranaense de Energia – COPEL (NYSE:ELP), VICI Properties Inc. (NYSE:VICI), HEICO Corporation (NYSE:HEI), and Amcor plc (NYSE:AMCR). All of these stocks’ market caps resemble TER’s market cap.

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As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $794 million. That figure was $1370 million in TER’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia – COPEL (NYSE:ELP) is the least popular one with only 7 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 67.9. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on TER as the stock returned 7.6% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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