With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Thermo Fisher Scientific Inc. (NYSE:TMO).
Is Thermo Fisher Scientific Inc. (NYSE:TMO) a safe stock to buy now? Money managers are in an optimistic mood. The number of bullish hedge fund bets inched up by 4 lately. Overall hedge fund sentiment towards TMO is currently at its all time high. Our calculations also showed that TMO ranked 28th among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the new hedge fund action regarding Thermo Fisher Scientific Inc. (NYSE:TMO).
How have hedgies been trading Thermo Fisher Scientific Inc. (NYSE:TMO)?
At Q2’s end, a total of 72 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 59 hedge funds with a bullish position in TMO a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of Thermo Fisher Scientific Inc. (NYSE:TMO), with a stake worth $666.1 million reported as of the end of March. Trailing Generation Investment Management was AQR Capital Management, which amassed a stake valued at $621.6 million. Marshall Wace LLP, Cantillon Capital Management, and Diamond Hill Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers were breaking ground themselves. Egerton Capital Limited, managed by John Armitage, assembled the most valuable position in Thermo Fisher Scientific Inc. (NYSE:TMO). Egerton Capital Limited had $99.8 million invested in the company at the end of the quarter. Richard Chilton’s Chilton Investment Company also initiated a $73.3 million position during the quarter. The following funds were also among the new TMO investors: Benjamin A. Smith’s Laurion Capital Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and D. E. Shaw’s D E Shaw.
Let’s go over 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 Accenture Plc (NYSE:ACN), salesforce.com, inc. (NYSE:CRM), HDFC Bank Limited (NYSE:HDB), and Broadcom Inc (NASDAQ:AVGO). This group of stocks’ market caps are similar to TMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACN | 38 | 1028621 | -2 |
| CRM | 82 | 5803927 | -11 |
| HDB | 27 | 1159846 | 3 |
| AVGO | 53 | 3268502 | 0 |
| Average | 50 | 2815224 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 50 hedge funds with bullish positions and the average amount invested in these stocks was $2815 million. That figure was $4141 million in TMO’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand HDFC Bank Limited (NYSE:HDB) is the least popular one with only 27 bullish hedge fund positions. Thermo Fisher Scientific Inc. (NYSE:TMO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TMO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TMO were disappointed as the stock returned -0.8% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
