Is Thermo Fisher Scientific Inc. (NYSE:TMO) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Thermo Fisher Scientific Inc. (NYSE:TMO) a healthy stock for your portfolio? The best stock pickers are taking an optimistic view. The number of long hedge fund bets advanced by 3 recently. Our calculations also showed that TMO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Blood of Generation Investment Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind let’s go over the key hedge fund action surrounding Thermo Fisher Scientific Inc. (NYSE:TMO).
What have hedge funds been doing with Thermo Fisher Scientific Inc. (NYSE:TMO)?
At the end of the foruth quarter, a total of 73 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in TMO over the last 18 quarters. So, let’s examine 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, David Blood and Al Gore’s Generation Investment Management has the most valuable position in Thermo Fisher Scientific Inc. (NYSE:TMO), worth close to $672.7 million, corresponding to 4.3% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $402.8 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass William von Mueffling’s Cantillon Capital Management, John Armitage’s Egerton Capital Limited and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Cryder Capital allocated the biggest weight to Thermo Fisher Scientific Inc. (NYSE:TMO), around 14.67% of its 13F portfolio. Steamboat Capital Partners is also relatively very bullish on the stock, earmarking 5.3 percent of its 13F equity portfolio to TMO.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Farallon Capital, created the most valuable position in Thermo Fisher Scientific Inc. (NYSE:TMO). Farallon Capital had $277.2 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $4.5 million position during the quarter. The other funds with brand new TMO positions are Steve Cohen’s Point72 Asset Management, Qing Li’s Sciencast Management, and Gordon W Malin’s Mountain Road Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Thermo Fisher Scientific Inc. (NYSE:TMO) but similarly valued. We will take a look at Costco Wholesale Corporation (NASDAQ:COST), United Technologies Corporation (NYSE:UTX), BP plc (NYSE:BP), and Paypal Holdings Inc (NASDAQ:PYPL). All of these stocks’ market caps resemble TMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COST | 70 | 4401660 | 7 |
| UTX | 81 | 7021856 | 7 |
| BP | 40 | 1634365 | 1 |
| PYPL | 126 | 6225698 | 22 |
| Average | 79.25 | 4820895 | 9.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 79.25 hedge funds with bullish positions and the average amount invested in these stocks was $4821 million. That figure was $3608 million in TMO’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 40 bullish hedge fund positions. Thermo Fisher Scientific Inc. (NYSE:TMO) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately TMO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TMO investors were disappointed as the stock returned -6.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
