“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Teck Resources Ltd (NYSE:TECK).
Teck Resources Ltd (NYSE:TECK) investors should pay attention to an increase in hedge fund interest in recent months. TECK was in 27 hedge funds’ portfolios at the end of the first quarter of 2019. There were 26 hedge funds in our database with TECK positions at the end of the previous quarter. Our calculations also showed that TECK isn’t among the 30 most popular stocks among hedge funds.
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 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 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.
We’re going to take a glance at the key hedge fund action encompassing Teck Resources Ltd (NYSE:TECK).
What does the smart money think about Teck Resources Ltd (NYSE:TECK)?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TECK over the last 15 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Impala Asset Management held the most valuable stake in Teck Resources Ltd (NYSE:TECK), which was worth $316.4 million at the end of the first quarter. On the second spot was Arrowstreet Capital which amassed $204.5 million worth of shares. Moreover, GMT Capital, Renaissance Technologies, and GLG Partners were also bullish on Teck Resources Ltd (NYSE:TECK), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key hedge funds have jumped into Teck Resources Ltd (NYSE:TECK) headfirst. GLG Partners, managed by Noam Gottesman, established the most valuable call position in Teck Resources Ltd (NYSE:TECK). GLG Partners had $12.7 million invested in the company at the end of the quarter. Mark Kingdon’s Kingdon Capital also initiated a $12.7 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Minhua Zhang’s Weld Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Teck Resources Ltd (NYSE:TECK) but similarly valued. These stocks are CenturyLink, Inc. (NYSE:CTL), ABIOMED, Inc. (NASDAQ:ABMD), Varian Medical Systems, Inc. (NYSE:VAR), and Vornado Realty Trust (NYSE:VNO). This group of stocks’ market valuations match TECK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTL | 32 | 1095768 | 1 |
| ABMD | 33 | 1188513 | 2 |
| VAR | 32 | 980134 | 2 |
| VNO | 30 | 474922 | 7 |
| Average | 31.75 | 934834 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $935 million. That figure was $1078 million in TECK’s case. ABIOMED, Inc. (NASDAQ:ABMD) is the most popular stock in this table. On the other hand Vornado Realty Trust (NYSE:VNO) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Teck Resources Ltd (NYSE:TECK) is even less popular than VNO. Hedge funds dodged a bullet by taking a bearish stance towards TECK. Our calculations showed that the top 15 most popular hedge fund stocks returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TECK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TECK investors were disappointed as the stock returned -14.7% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
