Should You Avoid Teradyne, Inc. (TER)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Teradyne, Inc. (NYSE:TER).

Is Teradyne, Inc. (NYSE:TER) an excellent investment today? Hedge funds are getting less bullish. The number of long hedge fund bets dropped by 5 lately. At the end of this article, we will also compare Teradyne, Inc. (NYSE:TER) to other stocks, including Syntel, Inc. (NASDAQ:SYNT), Bank Of The Ozarks Inc (NASDAQ:OZRK), and Dun & Bradstreet Corp (NYSE:DNB) to get a better sense of its popularity.

In today’s marketplace, there are many methods market participants employ to assess their holdings. Two of the most innovative methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outclass the S&P 500 by a healthy amount (see the details here).

With all of this in mind, we’re going to take a look at the key action encompassing Teradyne, Inc. (NYSE:TER).

Hedge fund activity in Teradyne, Inc. (NYSE:TER)

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 17% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Glenview Capital holds the number one position in Teradyne, Inc. (NYSE:TER). Glenview Capital has a $231.9 million position in the stock, comprising 1.2% of its 13F portfolio. Sitting at the No. 2 spot is Alkeon Capital Management, led by Panayotis Takis Sparaggis, holding a $66.3 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Chuck Royce’s Royce & Associates, D E Shaw, and David Harding’s Winton Capital Management.

Since Teradyne, Inc. (NYSE:TER) has faced a bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds who were dropping their entire stakes last quarter. At the top of the heap, Ron Gutfleish’s Elm Ridge Capital dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $8.2 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $7.6 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Teradyne, Inc. (NYSE:TER) but similarly valued. We will take a look at Syntel, Inc. (NASDAQ:SYNT), Bank Of The Ozarks Inc (NASDAQ:OZRK), Dun & Bradstreet Corp (NYSE:DNB), and LPL Financial Holdings Inc (NASDAQ:LPLA). This group of stocks’ market values is closest to Teradyne, Inc. (NYSE:TER)’s market value.

As you can see, these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $431 million. That figure was $539 million in Teradyne, Inc. (NYSE:TER)’s case. Dun & Bradstreet Corp (NYSE:DNB) is the most popular stock in this table. On the other hand, Bank Of The Ozarks Inc (NASDAQ:OZRK) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks, Teradyne, Inc. (NYSE:TER) 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.