How do we determine whether TESSCO Technologies, Inc. (NASDAQ:TESS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
TESSCO Technologies, Inc. (NASDAQ:TESS) was in 2 hedge funds’ portfolios at the end of the third quarter of 2019. TESS investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. There were 4 hedge funds in our database with TESS holdings at the end of the previous quarter. Our calculations also showed that TESS isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We’re going to take a gander at the key hedge fund action regarding TESSCO Technologies, Inc. (NASDAQ:TESS).
What does smart money think about TESSCO Technologies, Inc. (NASDAQ:TESS)?
Heading into the fourth quarter of 2019, a total of 2 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TESS over the last 17 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in TESSCO Technologies, Inc. (NASDAQ:TESS) was held by Renaissance Technologies, which reported holding $6.9 million worth of stock at the end of September. It was followed by Marshall Wace with a $0.1 million position.
Because TESSCO Technologies, Inc. (NASDAQ:TESS) has faced a decline in interest from the smart money, it’s easy to see that there exists a select few hedgies that slashed their entire stakes heading into Q4. Intriguingly, Frederick DiSanto’s Ancora Advisors dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $2.8 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to TESSCO Technologies, Inc. (NASDAQ:TESS). We will take a look at PRGX Global Inc (NASDAQ:PRGX), StealthGas Inc. (NASDAQ:GASS), GigCapital, Inc. (NYSE:GIG), and Intevac, Inc. (NASDAQ:IVAC). All of these stocks’ market caps match TESS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRGX | 7 | 37549 | 0 |
| GASS | 5 | 45969 | -1 |
| GIG | 5 | 21479 | -1 |
| IVAC | 6 | 19985 | 1 |
| Average | 5.75 | 31246 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $7 million in TESS’s case. PRGX Global Inc (NASDAQ:PRGX) is the most popular stock in this table. On the other hand StealthGas Inc. (NASDAQ:GASS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks TESSCO Technologies, Inc. (NASDAQ:TESS) is even less popular than GASS. Hedge funds dodged a bullet by taking a bearish stance towards TESS. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately TESS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TESS investors were disappointed as the stock returned -18.8% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
