Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Teleflex Incorporated (NYSE:TFX).
Is Teleflex Incorporated (NYSE:TFX) a great investment right now? The best stock pickers are taking an optimistic view. The number of long hedge fund bets improved by 4 lately. Our calculations also showed that TFX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). TFX was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 28 hedge funds in our database with TFX holdings at the end of the previous quarter.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Paul Marshall of Marshall Wace
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 gander at the fresh hedge fund action surrounding Teleflex Incorporated (NYSE:TFX).
What have hedge funds been doing with Teleflex Incorporated (NYSE:TFX)?
Heading into the first quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in TFX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Marshall Wace LLP was the largest shareholder of Teleflex Incorporated (NYSE:TFX), with a stake worth $273.6 million reported as of the end of September. Trailing Marshall Wace LLP was Select Equity Group, which amassed a stake valued at $226.8 million. Healthcor Management LP, Balyasny Asset Management, and Rock Springs Capital Management 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 Healthcor Management LP allocated the biggest weight to Teleflex Incorporated (NYSE:TFX), around 4.16% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, dishing out 3.08 percent of its 13F equity portfolio to TFX.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, initiated the largest position in Teleflex Incorporated (NYSE:TFX). Healthcor Management LP had $116.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $52 million position during the quarter. The following funds were also among the new TFX investors: Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Michael Rockefeller and Karl Kroeker’s Woodline Partners, and Bhagwan Jay Rao’s Integral Health Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Teleflex Incorporated (NYSE:TFX). These stocks are Altice USA, Inc. (NYSE:ATUS), Arch Capital Group Ltd. (NASDAQ:ACGL), Church & Dwight Co., Inc. (NYSE:CHD), and Discovery Communications Inc. (NASDAQ:DISCA). This group of stocks’ market caps match TFX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATUS | 54 | 3046592 | -1 |
| ACGL | 23 | 1250755 | 1 |
| CHD | 37 | 359916 | 0 |
| DISCA | 38 | 290567 | 8 |
| Average | 38 | 1236958 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1237 million. That figure was $936 million in TFX’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Arch Capital Group Ltd. (NASDAQ:ACGL) is the least popular one with only 23 bullish hedge fund positions. Teleflex Incorporated (NYSE:TFX) is not the least popular stock in this group but hedge fund interest is still below 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on TFX, though not to the same extent, as the stock returned -24.8% during the same time period and outperformed the market.
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.
