The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Teradata Corporation (NYSE:TDC) and determine whether the smart money was really smart about this stock.
Teradata Corporation (NYSE:TDC) investors should be aware of an increase in hedge fund interest recently. Teradata Corporation (NYSE:TDC) was in 31 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TDC isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
According to most stock holders, hedge funds are perceived as unimportant, old investment tools of years past. While there are over 8000 funds in operation at the moment, We look at the crème de la crème of this club, approximately 850 funds. Most estimates calculate that this group of people control the majority of the hedge fund industry's total capital, and by keeping track of their top equity investments, Insider Monkey has determined many investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Clint Carlson of Carlson Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we're going to take a glance at the fresh hedge fund action surrounding Teradata Corporation (NYSE:TDC).
Hedge fund activity in Teradata Corporation (NYSE:TDC)
At second quarter's end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in TDC a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Teradata Corporation (NYSE:TDC) was held by Lynrock Lake, which reported holding $69.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $29.4 million position. Other investors bullish on the company included Arrowstreet Capital, Carlson Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Teradata Corporation (NYSE:TDC), around 5.46% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, earmarking 2.58 percent of its 13F equity portfolio to TDC.
As one would reasonably expect, key money managers have been driving this bullishness. Fairpointe Capital, managed by Thyra Zerhusen, created the most valuable position in Teradata Corporation (NYSE:TDC). Fairpointe Capital had $17.7 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $1.3 million position during the quarter. The other funds with brand new TDC positions are Matthew Hulsizer's PEAK6 Capital Management, Donald Sussman's Paloma Partners, and Benjamin A. Smith's Laurion Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Teradata Corporation (NYSE:TDC) but similarly valued. We will take a look at Mercury General Corporation (NYSE:MCY), PagerDuty, Inc. (NYSE:PD), M.D.C. Holdings, Inc. (NYSE:MDC), The Ensign Group, Inc. (NASDAQ:ENSG), Winnebago Industries, Inc. (NYSE:WGO), Harmony Gold Mining Company Limited (NYSE:HMY), and First Hawaiian, Inc. (NASDAQ:FHB). This group of stocks' market caps match TDC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCY,17,149274,-5 PD,30,150553,5 MDC,20,96381,6 ENSG,19,60583,1 WGO,33,365601,14 HMY,10,85944,1 FHB,21,147277,0 Average,21.4,150802,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $238 million in TDC's case. Winnebago Industries, Inc. (NYSE:WGO) is the most popular stock in this table. On the other hand Harmony Gold Mining Company Limited (NYSE:HMY) is the least popular one with only 10 bullish hedge fund positions. Teradata Corporation (NYSE:TDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TDC is 85.7. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately TDC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on TDC were disappointed as the stock returned 8.9% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.