With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Tractor Supply Company (NASDAQ:TSCO), and we are going to carefully examine it in this article.
Is Tractor Supply Company (NASDAQ:TSCO) an outstanding investment right now? Money managers are buying. The number of long hedge fund bets increased by 2 recently, and there were 34 smart money managers long the stock at the end of the third quarter. With 34 bullish investors, the company didn’t stand a chance to make it as one of the 30 most popular stocks among ALL hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
While gathering more data about Tractor Supply Company (NASDAQ:TSCO), we found Wedgewood Partners’ Third Quarter 2018 Client Letter, in which this investment manager discusses the stock. Here is that part of the letter:
“Tractor Supply continues to execute well, reporting 10% growth in sales, with same store sales growth of 5.6% driven by both higher traffic and higher customer spending, and 35% earnings per share growth. The Company will be concluding an aggressive two-year investment ramp into technology capabilities, distribution, and stores, later this year.
We expect to reap sustainable comparable sales growth and margin expansion from those omnichannel investments over the next several years, supplemented by a steady cadence of mid-single digit square footage growth to take advantage of a growing total addressable market. As shares have appreciated meaningfully over the past 12 months, we trimmed positions but maintain a healthy overweight in Tractor Supply.”
Continuing with our analysis, we’re going to take a gander at the key hedge fund action regarding Tractor Supply Company (NASDAQ:TSCO).
How have hedgies been trading Tractor Supply Company (NASDAQ:TSCO)?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in TSCO at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tractor Supply Company (NASDAQ:TSCO) was held by Citadel Investment Group, which reported holding $247.3 million worth of stock at the end of September. It was followed by D E Shaw with a $121.8 million position. Other investors bullish on the company included Marshall Wace LLP, Park Presidio Capital, and Balyasny Asset Management.
Now, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Tractor Supply Company (NASDAQ:TSCO). Marshall Wace LLP had $89.4 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $29.8 million investment in the stock during the quarter. The other funds with brand new TSCO positions are Robert Pohly’s Samlyn Capital, Matthew Hulsizer’s PEAK6 Capital Management, and David Einhorn’s Greenlight Capital.
Let’s go over hedge fund activity in other stocks similar to Tractor Supply Company (NASDAQ:TSCO). We will take a look at Vail Resorts, Inc. (NYSE:MTN), Brookfield Infrastructure Partners L.P. (NYSE:BIP), Burlington Stores Inc (NYSE:BURL), and Campbell Soup Company (NYSE:CPB). This group of stocks’ market valuations resemble TSCO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTN | 30 | 808461 | 1 |
| BIP | 6 | 15818 | -2 |
| BURL | 35 | 972920 | 6 |
| CPB | 29 | 925852 | 3 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $969 million in TSCO’s case. Burlington Stores Inc (NYSE:BURL) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 6 bullish hedge fund positions. Tractor Supply Company (NASDAQ:TSCO) 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 BURL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
