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Hedge Funds Kept Buying Thermo Fisher Scientific (TMO) During The Crash

Abigail Fisher

In this article we will take a look at whether hedge funds think Thermo Fisher Scientific Inc. (NYSE:TMO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Thermo Fisher Scientific Inc. (NYSE:TMO) has experienced an increase in activity from the world's largest hedge funds lately. TMO was in 80 hedge funds' portfolios at the end of March. There were 73 hedge funds in our database with TMO positions 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.

In the eyes of most stock holders, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the upper echelon of this group, about 850 funds. Most estimates calculate that this group of people shepherd most of the smart money's total capital, and by observing their first-class investments, Insider Monkey has revealed several investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year 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 .

[caption id="attachment_189672" align="aligncenter" width="399"] David Blood of Generation Investment Management[/caption]

David Blood

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a peek at the latest hedge fund action encompassing Thermo Fisher Scientific Inc. (NYSE:TMO).

How have hedgies been trading 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 bullish on this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TMO over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Generation Investment Management held the most valuable stake in Thermo Fisher Scientific Inc. (NYSE:TMO), which was worth $542.3 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $352.6 million worth of shares. Cantillon Capital Management, Fisher Asset Management, and Diamond Hill Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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, earmarking 6.48 percent of its 13F equity portfolio to TMO.

As one would reasonably expect, key hedge funds have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, created 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 now take a look at 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 (NASDAQ:SNY). All of these stocks' market caps match TMO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABBV,81,5118264,10 PYPL,118,4659097,-8 ASML,30,1505012,8 SNY,15,970814,-16 Average,61,3063297,-1.5 [/table]

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 (NASDAQ: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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on TMO, though not to the same extent, as the stock returned 20% during the first two months of the second quarter (through May 22nd) and outperformed the market as well.

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

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