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Hedge Funds Aren’t Crazy About TESSCO Technologies, Inc. (TESS) Anymore

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  • TESS

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of TESSCO Technologies, Inc. (NASDAQ:TESS).

Is TESSCO Technologies, Inc. (NASDAQ:TESS) ready to rally soon? The smart money was taking a bearish view. The number of bullish hedge fund bets decreased by 4 in recent months. TESSCO Technologies, Inc. (NASDAQ:TESS) was in 3 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. Our calculations also showed that TESS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 7 hedge funds in our database with TESS positions at the end of the second quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most traders, hedge funds are seen as worthless, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading today, Our experts hone in on the leaders of this group, about 850 funds. These money managers control bulk of all hedge funds' total capital, and by shadowing their matchless stock picks, Insider Monkey has determined a few investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy defeated 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 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

MILLENNIUM MANAGEMENT
MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's take a look at the key hedge fund action surrounding TESSCO Technologies, Inc. (NASDAQ:TESS).

How have hedgies been trading TESSCO Technologies, Inc. (NASDAQ:TESS)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -57% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in TESS a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in TESSCO Technologies, Inc. (NASDAQ:TESS). Renaissance Technologies has a $2.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Ali Motamed of Invenomic Capital Management, with a $1.3 million position; the fund has 0.7% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to TESSCO Technologies, Inc. (NASDAQ:TESS), around 0.72% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0024 percent of its 13F equity portfolio to TESS.

Since TESSCO Technologies, Inc. (NASDAQ:TESS) has witnessed bearish sentiment from the smart money, it's easy to see that there was a specific group of money managers that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Greg Eisner's Engineers Gate Manager dropped the biggest stake of the "upper crust" of funds watched by Insider Monkey, totaling about $0.1 million in stock. Donald Sussman's fund, Paloma Partners, also cut its stock, about $0.1 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as TESSCO Technologies, Inc. (NASDAQ:TESS) but similarly valued. These stocks are SEACOR Marine Holdings Inc. (NYSE:SMHI), RealNetworks Inc (NASDAQ:RNWK), SRAX, Inc. (NASDAQ:SRAX), The LGL Group, Inc. (NYSE:LGL), CBM Bancorp, Inc. (NASDAQ:CBMB), MIND C.T.I. Ltd. (NASDAQ:MNDO), and Ring Energy Inc (NYSE:REI). All of these stocks' market caps resemble TESS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMHI,2,1341,-2 RNWK,4,6790,-1 SRAX,2,159,1 LGL,4,7816,-1 CBMB,3,1015,0 MNDO,1,152,0 REI,7,1621,-2 Average,3.3,2699,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $4 million in TESS's case. Ring Energy Inc (NYSE:REI) is the most popular stock in this table. On the other hand MIND C.T.I. Ltd. (NASDAQ:MNDO) is the least popular one with only 1 bullish hedge fund positions. TESSCO Technologies, Inc. (NASDAQ:TESS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TESS is 30.5. 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. 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 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on TESS as the stock returned 8% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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

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