Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Tractor Supply Company (NASDAQ:TSCO) in this article.
Is Tractor Supply Company (NASDAQ:TSCO) a bargain? Investors who are in the know were becoming less confident. The number of bullish hedge fund positions were cut by 10 in recent months. Tractor Supply Company (NASDAQ:TSCO) was in 29 hedge funds’ portfolios at the end of the first 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 Q1 rankings). There were 39 hedge funds in our database with TSCO positions at the end of the fourth quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Now let’s take a look at the latest hedge fund action surrounding Tractor Supply Company (NASDAQ:TSCO).
Do Hedge Funds Think TSCO Is A Good Stock To Buy Now?
At the end of March, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. By comparison, 37 hedge funds held shares or bullish call options in TSCO 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.
Among these funds, Select Equity Group held the most valuable stake in Tractor Supply Company (NASDAQ:TSCO), which was worth $630.4 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $146.6 million worth of shares. AQR Capital Management, Arrowstreet Capital, and Chilton Investment Company were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Tractor Supply Company (NASDAQ:TSCO), around 2.29% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, designating 2.01 percent of its 13F equity portfolio to TSCO.
Due to the fact that Tractor Supply Company (NASDAQ:TSCO) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers that decided to sell off their full holdings heading into Q2. At the top of the heap, Renaissance Technologies dropped the biggest position of all the hedgies followed by Insider Monkey, valued at about $31.6 million in stock, and Lee Hicks and Jan Koerner’s Park Presidio Capital was right behind this move, as the fund sold off about $29 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 10 funds heading into Q2.
Let’s now take a look at hedge fund activity in other stocks similar to Tractor Supply Company (NASDAQ:TSCO). We will take a look at Hewlett Packard Enterprise Company (NYSE:HPE), Western Digital Corporation (NASDAQ:WDC), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Teradyne, Inc. (NYSE:TER), Vipshop Holdings Limited (NYSE:VIPS), Fortis Inc. (NYSE:FTS), and Cheniere Energy Partners LP (NYSE:CQP). This group of stocks’ market caps resemble TSCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPE | 27 | 1067351 | -3 |
| WDC | 58 | 1913662 | 14 |
| TTWO | 41 | 822415 | -14 |
| TER | 44 | 1587670 | -3 |
| VIPS | 54 | 1341628 | 27 |
| FTS | 10 | 179412 | 1 |
| CQP | 2 | 8851 | -2 |
| Average | 33.7 | 988713 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $989 million. That figure was $1192 million in TSCO’s case. Western Digital Corporation (NASDAQ:WDC) 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 least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSCO is 37.2. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately TSCO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TSCO investors were disappointed as the stock returned 6.3% since the end of March (through 7/2) 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 in 2021.
Follow Tractor Supply Co (NASDAQ:TSCO)
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Disclosure: None. This article was originally published at Insider Monkey.
