Tetra Tech, Inc. (TTEK): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Tetra Tech, Inc. (NASDAQ:TTEK)?

Tetra Tech, Inc. (NASDAQ:TTEK) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that TTEK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

Andrew Sandler of Sandler Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the latest hedge fund action encompassing Tetra Tech, Inc. (NASDAQ:TTEK).

What does smart money think about Tetra Tech, Inc. (NASDAQ:TTEK)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TTEK over the last 18 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Tetra Tech, Inc. (NASDAQ:TTEK). AQR Capital Management has a $24.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On AQR Capital Management’s heels is Tim Curro of Value Holdings LP, with a $19.7 million position; 9.4% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions comprise Andrew Sandler’s Sandler Capital Management, Renaissance Technologies and Principal Global Investors’s Columbus Circle Investors. In terms of the portfolio weights assigned to each position Value Holdings LP allocated the biggest weight to Tetra Tech, Inc. (NASDAQ:TTEK), around 9.36% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, designating 1.49 percent of its 13F equity portfolio to TTEK.

Due to the fact that Tetra Tech, Inc. (NASDAQ:TTEK) has faced bearish sentiment from the smart money, it’s safe to say that there were a few fund managers that slashed their positions entirely last quarter. It’s worth mentioning that Michael Kharitonov and Jon David McAuliffe’s Voleon Capital cut the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $1.5 million in stock, and Mika Toikka’s AlphaCrest Capital Management was right behind this move, as the fund dumped about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Tetra Tech, Inc. (NASDAQ:TTEK). These stocks are Plains All American Pipeline, L.P. (NYSE:PAA), Allison Transmission Holdings Inc (NYSE:ALSN), Cirrus Logic, Inc. (NASDAQ:CRUS), and Tandem Diabetes Care Inc (NASDAQ:TNDM). This group of stocks’ market caps resemble TTEK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $116 million in TTEK’s case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 8 bullish hedge fund positions. Tetra Tech, Inc. (NASDAQ:TTEK) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately TTEK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TTEK investors were disappointed as the stock returned 8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.