Were Hedge Funds Right About Piling Into Thermo Fisher Scientific Inc. (TMO)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Thermo Fisher Scientific Inc. (NYSE:TMO) and determine whether the smart money was really smart about this stock.

Thermo Fisher Scientific Inc. (NYSE:TMO) was in 80 hedge funds’ portfolios at the end of the first quarter of 2020. TMO investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 73 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 (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.

If you’d ask most investors, hedge funds are viewed as underperforming, outdated financial tools of the past. While there are over 8000 funds with their doors open at the moment, We hone in on the upper echelon of this club, about 850 funds. These money managers shepherd the lion’s share of the hedge fund industry’s total asset base, and by shadowing their unrivaled investments, Insider Monkey has figured out many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the recent hedge fund action encompassing Thermo Fisher Scientific Inc. (NYSE:TMO).

What have hedge funds been doing with Thermo Fisher Scientific Inc. (NYSE:TMO)?

Heading into the second quarter of 2020, a total of 80 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TMO over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Thermo Fisher Scientific Inc. (NYSE:TMO) was held by Generation Investment Management, which reported holding $542.3 million worth of stock at the end of September. It was followed by Farallon Capital with a $352.6 million position. Other investors bullish on the company included Cantillon Capital Management, Fisher Asset Management, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Cryder Capital allocated the biggest weight to Thermo Fisher Scientific Inc. (NYSE:TMO), around 14.65% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 6.48 percent of its 13F equity portfolio to TMO.

Now, specific money managers have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, established the most outsized position in Thermo Fisher Scientific Inc. (NYSE:TMO). Senator Investment Group had $82.2 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $40 million position during the quarter. The other funds with new positions in the stock are  Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors, and David Gallo’s Valinor Management LLC.

Let’s go over hedge fund activity in other stocks similar to Thermo Fisher Scientific Inc. (NYSE:TMO). These stocks are AbbVie Inc (NYSE:ABBV), Paypal Holdings Inc (NASDAQ:PYPL), ASML Holding N.V. (NASDAQ:ASML), and Sanofi (NYSE:SNY). This group of stocks’ market values match TMO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 61 hedge funds with bullish positions and the average amount invested in these stocks was $3063 million. That figure was $3188 million in TMO’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 15 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. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on TMO, though not to the same extent, as the stock returned 24.1% during the first two months and twenty five days of the second quarter and outperformed the market as well.

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