Should You Buy TESSCO Technologies, Inc. (TESS)?

Is TESSCO Technologies, Inc. (NASDAQ:TESS) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Is TESSCO Technologies, Inc. (NASDAQ:TESS) a buy here? Prominent investors are getting more optimistic. The number of long hedge fund bets moved up by 2 lately. TESS was in 6 hedge funds’ portfolios at the end of the third quarter of 2015. There were 4 hedge funds in our database with TESS positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cidara Therapeutics Inc (NASDAQ:CDTX), Inventure Foods Inc (NASDAQ:SNAK), and EMCORE Corporation (NASDAQ:EMKR) to gather more data points.

In the eyes of most shareholders, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers hone in on the masters of this group, around 700 funds. Most estimates calculate that this group of people preside over most of all hedge funds’ total capital, and by monitoring their top stock picks, Insider Monkey has determined a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s view the fresh action encompassing TESSCO Technologies, Inc. (NASDAQ:TESS).

What have hedge funds been doing with TESSCO Technologies, Inc. (NASDAQ:TESS)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in TESSCO Technologies, Inc. (NASDAQ:TESS), worth close to $18.7 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, led by Jim Simons, holding an $6.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism contain Mark Coe’s Coe Capital Management, Israel Englander’s Millennium Management and Chao Ku’s Nine Chapters Capital Management.

Now, specific money managers have jumped into TESSCO Technologies, Inc. (NASDAQ:TESS) headfirst. Coe Capital Management initiated the most valuable position in TESSCO Technologies, Inc. (NASDAQ:TESS). Coe Capital Management had $0.6 million invested in the company at the end of the quarter. Nine Chapters Capital Management also made an $0.2 million investment in the stock during the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TESSCO Technologies, Inc. (NASDAQ:TESS) but similarly valued. These stocks are Cidara Therapeutics Inc (NASDAQ:CDTX), Inventure Foods Inc (NASDAQ:SNAK), EMCORE Corporation (NASDAQ:EMKR), and ProShares UltraShort Nasdaq Biotech (NASDAQ:BIS). All of these stocks’ market caps match TESS’s market cap.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $27 million in TESS’s case. EMCORE Corporation (NASDAQ:EMKR) is the most popular stock in this table. On the other hand ProShares UltraShort Nasdaq Biotech (NASDAQ:BIS) is the least popular one with only 4 bullish hedge fund positions. TESSCO Technologies, Inc. (NASDAQ:TESS) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EMKR might be a better candidate to consider a long position.