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Hedge Funds Aren’t Crazy About Teleflex Incorporated (TFX) Anymore

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  • TFX

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 Melvin Capital's recent GameStop 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) a healthy stock for your portfolio? Money managers were taking a bearish view. The number of long hedge fund positions retreated by 3 in recent months. Teleflex Incorporated (NYSE:TFX) was in 30 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that TFX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 33 hedge funds in our database with TFX holdings at the end of March.

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Kris Jenner - Rock Springs Capital
Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a glance at the new hedge fund action encompassing Teleflex Incorporated (NYSE:TFX).

Do Hedge Funds Think TFX Is A Good Stock To Buy Now?

At Q2's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in TFX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Paul Marshall and Ian Wace's Marshall Wace LLP has the most valuable position in Teleflex Incorporated (NYSE:TFX), worth close to $368.7 million, corresponding to 1.9% of its total 13F portfolio. The second largest stake is held by Michael Rockefeller and KarláKroeker of Woodline Partners, with a $58 million position; 1.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish contain Brian Ashford-Russell and Tim Woolley's Polar Capital, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and Jerome Pfund and Michael Sjostrom's Sectoral Asset Management. In terms of the portfolio weights assigned to each position Sectoral Asset Management allocated the biggest weight to Teleflex Incorporated (NYSE:TFX), around 2.58% of its 13F portfolio. Codex Capital is also relatively very bullish on the stock, setting aside 2.49 percent of its 13F equity portfolio to TFX.

Since Teleflex Incorporated (NYSE:TFX) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies that slashed their full holdings heading into Q3. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest stake of all the hedgies tracked by Insider Monkey, comprising about $59.2 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund sold off about $27 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds heading into Q3.

Let's now take a look at 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 Broadridge Financial Solutions, Inc. (NYSE:BR), M&T Bank Corporation (NYSE:MTB), Charles River Laboratories International Inc. (NYSE:CRL), Warner Music Group Corp. (NASDAQ:WMG), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Incyte Corporation (NASDAQ:INCY), and Ally Financial Inc (NYSE:ALLY). All of these stocks' market caps are closest to TFX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BR,27,315722,5 MTB,46,539380,10 CRL,44,1217955,2 WMG,29,793609,2 SHG,5,31985,-1 INCY,34,3644056,2 ALLY,54,2432402,3 Average,34.1,1282158,3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1282 million. That figure was $702 million in TFX's case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 5 bullish hedge fund positions. Teleflex Incorporated (NYSE:TFX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TFX is 50. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately TFX wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TFX investors were disappointed as the stock returned -9.5% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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