Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Tractor Supply Company (NASDAQ:TSCO).
Is Tractor Supply Company (NASDAQ:TSCO) an excellent investment now? Investors who are in the know were turning less bullish. The number of long hedge fund positions retreated by 5 in recent months. Tractor Supply Company (NASDAQ:TSCO) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 48. Our calculations also showed that TSCO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Richard Chilton of Chilton Investment Company
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a look at the fresh hedge fund action encompassing Tractor Supply Company (NASDAQ:TSCO).
Do Hedge Funds Think TSCO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 48 hedge funds with a bullish position in TSCO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the biggest position in Tractor Supply Company (NASDAQ:TSCO), worth close to $621.2 million, amounting to 2.1% of its total 13F portfolio. On Select Equity Group’s heels is Citadel Investment Group, led by Ken Griffin, holding a $118.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Richard Chilton’s Chilton Investment Company, Brandon Haley’s Holocene Advisors and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Tractor Supply Company (NASDAQ:TSCO), around 2.09% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, designating 1.69 percent of its 13F equity portfolio to TSCO.
Since Tractor Supply Company (NASDAQ:TSCO) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that slashed their positions entirely heading into Q4. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest investment of all the hedgies watched by Insider Monkey, totaling about $25.2 million in stock. Seth Cogswell’s fund, Running Oak Capital, also dropped its stock, about $6.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tractor Supply Company (NASDAQ:TSCO) but similarly valued. We will take a look at Fox Corporation (NASDAQ:FOXA), DISH Network Corp. (NASDAQ:DISH), Verisign, Inc. (NASDAQ:VRSN), Huntington Bancshares Incorporated (NASDAQ:HBAN), ORIX Corporation (NYSE:IX), Invitation Homes Inc. (NYSE:INVH), and Catalent Inc (NYSE:CTLT). This group of stocks’ market valuations resemble TSCO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FOXA | 32 | 616945 | -3 |
| DISH | 51 | 2439908 | 0 |
| VRSN | 40 | 5398949 | -1 |
| HBAN | 27 | 298895 | -6 |
| IX | 4 | 5007 | 0 |
| INVH | 36 | 824544 | 3 |
| CTLT | 38 | 1113573 | -2 |
| Average | 32.6 | 1528260 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $1528 million. That figure was $1219 million in TSCO’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Tractor Supply Company (NASDAQ:TSCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TSCO is 51.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on TSCO as the stock returned 11.5% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Tractor Supply Co (NASDAQ:TSCO)
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Disclosure: None. This article was originally published at Insider Monkey.
