We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Teleflex Incorporated (NYSE:TFX).
Is Teleflex Incorporated (NYSE:TFX) ready to rally soon? Money managers are becoming more confident. The number of long hedge fund positions moved up by 6 in recent months. Our calculations also showed that TFX isn't among the 30 most popular stocks among hedge funds. TFX was in 25 hedge funds' portfolios at the end of the second quarter of 2019. There were 19 hedge funds in our database with TFX holdings at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the key hedge fund action regarding Teleflex Incorporated (NYSE:TFX).
How are hedge funds trading Teleflex Incorporated (NYSE:TFX)?
Heading into the third quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TFX over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Robert Joseph Caruso's Select Equity Group has the largest position in Teleflex Incorporated (NYSE:TFX), worth close to $254.4 million, accounting for 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is Paul Marshall and Ian Wace of Marshall Wace LLP, with a $250.5 million position; 2.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism consist of Steve Cohen's Point72 Asset Management, Brian Ashford-Russell and Tim Woolley's Polar Capital and Israel Englander's Millennium Management.
As industrywide interest jumped, some big names have jumped into Teleflex Incorporated (NYSE:TFX) headfirst. Caxton Associates LP, managed by Bruce Kovner, initiated the biggest position in Teleflex Incorporated (NYSE:TFX). Caxton Associates LP had $8.4 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new TFX investors: Jeffrey Talpins's Element Capital Management, Benjamin A. Smith's Laurion Capital Management, and Mike Vranos's Ellington.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Teleflex Incorporated (NYSE:TFX) but similarly valued. We will take a look at Genuine Parts Company (NYSE:GPC), Sasol Limited (NYSE:SSL), Tenaris S.A. (NYSE:TS), and International Flavors & Fragrances Inc (NYSE:IFF). This group of stocks' market valuations match TFX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPC,20,315972,-2 SSL,8,19687,3 TS,16,657304,1 IFF,18,222801,2 Average,15.5,303941,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $880 million in TFX's case. Genuine Parts Company (NYSE:GPC) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Teleflex Incorporated (NYSE:TFX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on TFX, though not to the same extent, as the stock returned 2.7% during the third quarter 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.