The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Tractor Supply Company (NASDAQ:TSCO), and what that likely means for the prospects of the company and its stock.
Tractor Supply Company (NASDAQ:TSCO) shareholders have witnessed an increase in hedge fund interest of late. TSCO was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 34 hedge funds in our database with TSCO holdings at the end of the previous quarter. Our calculations also showed that TSCO isn’t among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a gander at the recent hedge fund action regarding Tractor Supply Company (NASDAQ:TSCO).
Hedge fund activity in Tractor Supply Company (NASDAQ:TSCO)
At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TSCO over the last 14 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Tractor Supply Company (NASDAQ:TSCO). Citadel Investment Group has a $141.6 million position in the stock, comprising 0.1% of its 13F portfolio. On Citadel Investment Group’s heels is D E Shaw, led by D. E. Shaw, holding a $105 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions include Dmitry Balyasny’s Balyasny Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Steve Cohen’s Point72 Asset Management.
As one would reasonably expect, specific money managers have been driving this bullishness. Interval Partners, managed by Gregg Moskowitz, established the largest position in Tractor Supply Company (NASDAQ:TSCO). Interval Partners had $20.4 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $10.6 million position during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Sander Gerber’s Hudson Bay Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks similar to Tractor Supply Company (NASDAQ:TSCO). These stocks are J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), SVB Financial Group (NASDAQ:SIVB), Old Dominion Freight Line (NASDAQ:ODFL), and Sociedad Química y Minera de Chile S.A. (NYSE:SQM). All of these stocks’ market caps are similar to TSCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JBHT | 25 | 318273 | -4 |
| SIVB | 33 | 666884 | -4 |
| ODFL | 20 | 218611 | -4 |
| SQM | 8 | 56321 | -1 |
| Average | 21.5 | 315022 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $315 million. That figure was $770 million in TSCO’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Tractor Supply Company (NASDAQ:TSCO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately TSCO wasn’t in this group. Hedge funds that bet on TSCO were disappointed as the stock returned 7.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
