Is TE Connectivity Ltd (TEL) A Good Stock To Buy?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about TE Connectivity Ltd (NYSE:TEL).

Is TE Connectivity Ltd (NYSE:TEL) an excellent investment now? The smart money is becoming less confident. The number of long hedge fund positions went down by 2 recently. TEL was in 23 hedge funds’ portfolios at the end of the third quarter of 2016. There were 25 hedge funds in our database with TEL positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Boston Properties, Inc. (NYSE:BXP), Sun Life Financial Inc. (USA) (NYSE:SLF), and Marathon Petroleum Corp (NYSE:MPC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How have hedgies been trading TE Connectivity Ltd (NYSE:TEL)?

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 8% from the previous quarter, continuing the trend of ownership declines witnessed throughout the last year. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC has the number one position in TE Connectivity Ltd. (NYSE:TEL), worth close to $431.2 million, accounting for 3.6% of its total 13F portfolio. The second largest stake is held by D E Shaw, founded by David E. Shaw, which holds a $100.1 million position. Remaining professional money managers that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, Richard S. Pzena’s Pzena Investment Management, and Cliff Asness’ AQR Capital Management.

Since TE Connectivity Ltd (NYSE:TEL) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $2.8 million in stock. Jacob Gottlieb’s fund, Visium Asset Management, also dropped its stock, about $2.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to TE Connectivity Ltd. (NYSE:TEL). These stocks are Boston Properties, Inc. (NYSE:BXP), Sun Life Financial Inc. (USA) (NYSE:SLF), Marathon Petroleum Corp (NYSE:MPC), and Cerner Corporation (NASDAQ:CERN). This group of stocks’ market values resemble TEL’s market value.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1.04 billion. That figure was $870 million in TEL’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (USA) (NYSE:SLF) is the least popular one with only 13 bullish hedge fund positions. TE Connectivity Ltd. (NYSE:TEL) 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. In this regard MPC might be a better candidate to consider a long position in at the moment.

Disclosure: None