Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Tetra Tech, Inc. (NASDAQ:TTEK) and see how the stock is affected by the recent hedge fund activity.
Tetra Tech, Inc. (NASDAQ:TTEK) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hatteras Financial Corp. (NYSE:HTS), WNS (Holdings) Limited (ADR) (NYSE:WNS), and Alon USA Partners LP (NYSE:ALDW) to gather more data points.
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If you’d ask most investors, hedge funds are seen as underperforming, outdated investment tools of the past. While there are over 8,000 funds in operation today, Our experts hone in on the moguls of this club, around 700 funds. It is estimated that this group of investors oversee the majority of all hedge funds’ total capital, and by observing their top stock picks, Insider Monkey has uncovered various investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, we’re going to take a glance at the new action regarding Tetra Tech, Inc. (NASDAQ:TTEK).
What does the smart money think about Tetra Tech, Inc. (NASDAQ:TTEK)?
Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Tetra Tech, Inc. (NASDAQ:TTEK). Pzena Investment Management has a $30.8 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Intrepid Capital Management, managed by Mark Travis, which holds a $26.4 million position; 9.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish contain Lee Munder’s Lee Munder Capital Group, Joel Greenblatt’s Gotham Asset Management and Martin Whitman’s Third Avenue Management.
It’s worth mentioning that John A. Levin’s Levin Capital Strategies said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $1.4 million in stock, and Boaz Weinstein’s Saba Capital was right behind this move, as the fund cut about $1 million worth. These bearish behaviors 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 – not necessarily in the same industry as Tetra Tech, Inc. (NASDAQ:TTEK) but similarly valued. We will take a look at Hatteras Financial Corp. (NYSE:HTS), WNS (Holdings) Limited (ADR) (NYSE:WNS), Alon USA Partners LP (NYSE:ALDW), and Meritage Homes Corp (NYSE:MTH). This group of stocks’ market valuations resemble TTEK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTS | 11 | 101643 | -4 |
| WNS | 11 | 67417 | 3 |
| ALDW | 5 | 10783 | 2 |
| MTH | 13 | 198090 | -1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $113 million in TTEK’s case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Alon USA Partners LP (NYSE:ALDW) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Tetra Tech, Inc. (NASDAQ:TTEK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
