We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded The Toro Company (NYSE:TTC) based on those filings.
Is The Toro Company (NYSE:TTC) an outstanding investment right now? Hedge funds are getting more bullish. The number of bullish hedge fund bets improved by 2 in recent months. Our calculations also showed that TTC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most shareholders, hedge funds are viewed as worthless, outdated investment tools of yesteryear. While there are over 8000 funds in operation at present, Our researchers hone in on the moguls of this club, approximately 850 funds. It is estimated that this group of investors direct the majority of all hedge funds’ total capital, and by monitoring their top equity investments, Insider Monkey has determined many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the new hedge fund action encompassing The Toro Company (NYSE:TTC).
How are hedge funds trading The Toro Company (NYSE:TTC)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the third quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in TTC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in The Toro Company (NYSE:TTC), which was worth $415.6 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $120.2 million worth of shares. Fisher Asset Management, Chilton Investment Company, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to The Toro Company (NYSE:TTC), around 4.12% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 2.62 percent of its 13F equity portfolio to TTC.
As one would reasonably expect, key hedge funds were breaking ground themselves. Bridgewater Associates, managed by Ray Dalio, assembled the largest position in The Toro Company (NYSE:TTC). Bridgewater Associates had $2 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Qing Li’s Sciencast Management, Dmitry Balyasny’s Balyasny Asset Management, and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Toro Company (NYSE:TTC) but similarly valued. We will take a look at F5 Networks, Inc. (NASDAQ:FFIV), Masimo Corporation (NASDAQ:MASI), Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), and Wayfair Inc (NYSE:W). All of these stocks’ market caps resemble TTC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FFIV | 29 | 1184887 | 4 |
| MASI | 30 | 171518 | 1 |
| JAZZ | 25 | 1192685 | -2 |
| W | 33 | 1500314 | -1 |
| Average | 29.25 | 1012351 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1012 million. That figure was $774 million in TTC’s case. Wayfair Inc (NYSE:W) is the most popular stock in this table. On the other hand Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks The Toro Company (NYSE:TTC) is even less popular than JAZZ. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on TTC, though not to the same extent, as the stock returned -24.6% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
