We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Tech Data Corp (NASDAQ:TECD), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Tech Data Corp (NASDAQ:TECD) a sound investment now? The smart money is taking a bullish view. The number of long hedge fund bets inched up by 11 lately. Our calculations also showed that TECD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the key hedge fund action encompassing Tech Data Corp (NASDAQ:TECD).
Hedge fund activity in Tech Data Corp (NASDAQ:TECD)
At Q4’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 48% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TECD over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Alpine Associates held the most valuable stake in Tech Data Corp (NASDAQ:TECD), which was worth $124.9 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $120.1 million worth of shares. Renaissance Technologies, Millennium Management, and Water Island Capital 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 Sand Grove Capital Partners allocated the biggest weight to Tech Data Corp (NASDAQ:TECD), around 8.53% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, setting aside 7.38 percent of its 13F equity portfolio to TECD.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Alpine Associates, managed by Robert Emil Zoellner, created the most valuable position in Tech Data Corp (NASDAQ:TECD). Alpine Associates had $124.9 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also made a $30.5 million investment in the stock during the quarter. The following funds were also among the new TECD investors: Simon Davies’s Sand Grove Capital Partners, Michel Massoud’s Melqart Asset Management, and David Alexander Witkin’s Beryl Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tech Data Corp (NASDAQ:TECD) but similarly valued. We will take a look at Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), Mirati Therapeutics, Inc. (NASDAQ:MRTX), Highwoods Properties Inc (NYSE:HIW), and Nuance Communications Inc. (NASDAQ:NUAN). This group of stocks’ market caps are closest to TECD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TKC | 7 | 49348 | 1 |
| MRTX | 32 | 1719243 | -3 |
| HIW | 16 | 188536 | -8 |
| NUAN | 39 | 966448 | 10 |
| Average | 23.5 | 730894 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $731 million. That figure was $645 million in TECD’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 7 bullish hedge fund positions. Tech Data Corp (NASDAQ:TECD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on TECD as the stock returned -11.4% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
