Does Thermo Fisher Scientific Inc. (NYSE:TMO) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
Thermo Fisher Scientific Inc. (NYSE:TMO) was in 56 hedge funds’ portfolios at the end of the third quarter of 2018. TMO shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. There were 59 hedge funds in our database with TMO holdings at the end of the previous quarter. Our calculations also showed that TMO isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the fresh hedge fund action encompassing Thermo Fisher Scientific Inc. (NYSE:TMO).
What have hedge funds been doing with Thermo Fisher Scientific Inc. (NYSE:TMO)?
At Q3’s end, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TMO over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Eagle Capital Management held the most valuable stake in Thermo Fisher Scientific Inc. (NYSE:TMO), which was worth $800.6 million at the end of the third quarter. On the second spot was Generation Investment Management which amassed $737.2 million worth of shares. Moreover, Glenview Capital, Viking Global, and Select Equity Group were also bullish on Thermo Fisher Scientific Inc. (NYSE:TMO), allocating a large percentage of their portfolios to this stock.
Due to the fact that Thermo Fisher Scientific Inc. (NYSE:TMO) has experienced bearish sentiment from the smart money, logic holds that there were a few funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP said goodbye to the biggest stake of the 700 funds watched by Insider Monkey, worth about $113.9 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund said goodbye to about $78.1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Thermo Fisher Scientific Inc. (NYSE:TMO) but similarly valued. These stocks are General Electric Company (NYSE:GE), Booking Holdings Inc. (NASDAQ:BKNG), Equinor ASA (NYSE:EQNR), and Lowe’s Companies, Inc. (NYSE:LOW). All of these stocks’ market caps are closest to TMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GE | 46 | 4540328 | 2 |
| BKNG | 68 | 6498246 | -2 |
| EQNR | 12 | 433196 | 3 |
| LOW | 57 | 4725018 | 1 |
| Average | 45.75 | 4049197 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.75 hedge funds with bullish positions and the average amount invested in these stocks was $4.05 billion. That figure was $4.60 billion in TMO’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 12 bullish hedge fund positions. Thermo Fisher Scientific Inc. (NYSE:TMO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BKNG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
