We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Bio-Techne Corporation (NASDAQ:TECH).
Bio-Techne Corporation (NASDAQ:TECH) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that TECH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_69704" align="aligncenter" width="400"] Andrew Sandler of Sandler Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind we're going to view the key hedge fund action regarding Bio-Techne Corporation (NASDAQ:TECH).
How have hedgies been trading Bio-Techne Corporation (NASDAQ:TECH)?
At Q4's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TECH 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.
According to Insider Monkey's hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the number one position in Bio-Techne Corporation (NASDAQ:TECH). Renaissance Technologies has a $111.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $49.4 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Cliff Asness's AQR Capital Management, D. E. Shaw's D E Shaw and Andrew Sandler's Sandler Capital Management. In terms of the portfolio weights assigned to each position Sandler Capital Management allocated the biggest weight to Bio-Techne Corporation (NASDAQ:TECH), around 1.51% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.58 percent of its 13F equity portfolio to TECH.
Consequently, key money managers were breaking ground themselves. Osterweis Capital Management, managed by John Osterweis, assembled the most valuable position in Bio-Techne Corporation (NASDAQ:TECH). Osterweis Capital Management had $6.4 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $3 million investment in the stock during the quarter. The following funds were also among the new TECH investors: Lee Ainslie's Maverick Capital, Dmitry Balyasny's Balyasny Asset Management, and Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks similar to Bio-Techne Corporation (NASDAQ:TECH). These stocks are Alaska Air Group, Inc. (NYSE:ALK), Brookfield Renewable Partners L.P. (NYSE:BEP), NovoCure Limited (NASDAQ:NVCR), and News Corp (NASDAQ:NWSA). This group of stocks' market caps resemble TECH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALK,39,627119,4 BEP,4,11244,0 NVCR,22,450885,-2 NWSA,26,511464,-7 Average,22.75,400178,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $400 million. That figure was $267 million in TECH's case. Alaska Air Group, Inc. (NYSE:ALK) is the most popular stock in this table. On the other hand Brookfield Renewable Partners L.P. (NYSE:BEP) is the least popular one with only 4 bullish hedge fund positions. Bio-Techne Corporation (NASDAQ:TECH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately TECH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TECH were disappointed as the stock returned -26.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. 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.