Do Hedge Funds Love Tractor Supply Company (TSCO)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Tractor Supply Company (NASDAQ:TSCO)? The smart money sentiment can provide an answer to this question.

Is Tractor Supply Company (NASDAQ:TSCO) going to take off soon? Investors who are in the know were becoming more confident. The number of bullish hedge fund bets moved up by 9 in recent months. Tractor Supply Company (NASDAQ:TSCO) was in 38 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 48. Our calculations also showed that TSCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most shareholders, hedge funds are perceived as worthless, outdated investment tools of the past. While there are over 8000 funds in operation today, Our researchers look at the bigwigs of this club, about 850 funds. These investment experts command the lion’s share of the smart money’s total capital, and by keeping an eye on their matchless investments, Insider Monkey has unearthed many investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. 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 homepage. Keeping this in mind let’s check out the latest hedge fund action encompassing Tractor Supply Company (NASDAQ:TSCO).

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

At the end of the second quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the first quarter of 2020. By comparison, 38 hedge funds held shares or bullish call options in TSCO a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Tractor Supply Company (NASDAQ:TSCO) was held by Select Equity Group, which reported holding $615.3 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $199.2 million position. Other investors bullish on the company included Arrowstreet Capital, Holocene Advisors, and AQR Capital Management. In terms of the portfolio weights assigned to each position Running Oak Capital allocated the biggest weight to Tractor Supply Company (NASDAQ:TSCO), around 3.39% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 2.1 percent of its 13F equity portfolio to TSCO.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Tractor Supply Company (NASDAQ:TSCO). Citadel Investment Group had $199.2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $36.5 million position during the quarter. The following funds were also among the new TSCO investors: Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tractor Supply Company (NASDAQ:TSCO) but similarly valued. We will take a look at Burlington Stores Inc (NYSE:BURL), Cheniere Energy Partners LP (NYSE:CQP), Ventas, Inc. (NYSE:VTR), Expeditors International of Washington, Inc. (NASDAQ:EXPD), FleetCor Technologies, Inc. (NYSE:FLT), EXACT Sciences Corporation (NASDAQ:EXAS), and Waters Corporation (NYSE:WAT). This group of stocks’ market values are closest to TSCO’s market value.

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As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $1378 million. That figure was $1374 million in TSCO’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 2 bullish hedge fund positions. Tractor Supply Company (NASDAQ:TSCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TSCO is 77.7. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on TSCO as the stock returned 4.3% since the end of Q2 (through 10/11) 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.