How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Telos Corporation (NASDAQ:TLS).
Telos Corporation (NASDAQ:TLS) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 28. TLS investors should pay attention to an increase in enthusiasm from smart money of late. There were 15 hedge funds in our database with TLS positions at the end of the first quarter. Our calculations also showed that TLS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this stock pitch. We go through lists like the 10 best growth stocks to buy 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. Now we’re going to check out the key hedge fund action encompassing Telos Corporation (NASDAQ:TLS).
Do Hedge Funds Think TLS Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the first quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in TLS a year ago. So, let’s check 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, Steven Ng and Andrew Mitchell’s Ophir Asset Management has the biggest position in Telos Corporation (NASDAQ:TLS), worth close to $42.1 million, corresponding to 7.4% of its total 13F portfolio. The second largest stake is held by Masters Capital Management, managed by Mike Masters, which holds a $34 million position; the fund has 1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management, Ben Jacobs’s Anomaly Capital Management and Mina Faltas’s Washington Harbour Partners. In terms of the portfolio weights assigned to each position Ophir Asset Management allocated the biggest weight to Telos Corporation (NASDAQ:TLS), around 7.39% of its 13F portfolio. Washington Harbour Partners is also relatively very bullish on the stock, setting aside 3.38 percent of its 13F equity portfolio to TLS.
As aggregate interest increased, key hedge funds were breaking ground themselves. Masters Capital Management, managed by Mike Masters, established the largest position in Telos Corporation (NASDAQ:TLS). Masters Capital Management had $34 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital also initiated a $17.7 million position during the quarter. The following funds were also among the new TLS investors: Paul Tudor Jones’s Tudor Investment Corp, Peter Muller’s PDT Partners, and Jinghua Yan’s TwinBeech Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Telos Corporation (NASDAQ:TLS). These stocks are First Midwest Bancorp Inc (NASDAQ:FMBI), First Merchants Corporation (NASDAQ:FRME), Belden Inc. (NYSE:BDC), Dream Finders Homes, Inc. (NASDAQ:DFH), American Assets Trust, Inc (NYSE:AAT), Renasant Corporation (NASDAQ:RNST), and CareTrust REIT Inc (NASDAQ:CTRE). All of these stocks’ market caps resemble TLS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMBI | 17 | 107837 | 4 |
| FRME | 12 | 118179 | 1 |
| BDC | 15 | 172473 | -2 |
| DFH | 7 | 54133 | -3 |
| AAT | 10 | 20140 | -2 |
| RNST | 9 | 7016 | 2 |
| CTRE | 13 | 43106 | -2 |
| Average | 11.9 | 74698 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $229 million in TLS’s case. First Midwest Bancorp Inc (NASDAQ:FMBI) is the most popular stock in this table. On the other hand Dream Finders Homes, Inc. (NASDAQ:DFH) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Telos Corporation (NASDAQ:TLS) is more popular among hedge funds. Our overall hedge fund sentiment score for TLS is 79.4. 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. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately TLS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TLS were disappointed as the stock returned -21.6% since the end of the second quarter (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Telos Corp (OTCMKTS:TLS)
Follow Telos Corp (OTCMKTS:TLS)
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Disclosure: None. This article was originally published at Insider Monkey.
