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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether IDEXX Laboratories, Inc. (NASDAQ:IDXX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is IDEXX Laboratories, Inc. (NASDAQ:IDXX) a buy here? The smart money is becoming hopeful. The number of bullish hedge fund bets increased by 4 recently. Our calculations also showed that IDXX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). IDXX was in 37 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 33 hedge funds in our database with IDXX holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30668" align="aligncenter" width="400"] Richard Chilton of Chilton Investment Company[/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 let's view the new hedge fund action surrounding IDEXX Laboratories, Inc. (NASDAQ:IDXX).
How have hedgies been trading IDEXX Laboratories, Inc. (NASDAQ:IDXX)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IDXX over the last 18 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of IDEXX Laboratories, Inc. (NASDAQ:IDXX), with a stake worth $167.1 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $101.9 million. Chilton Investment Company, Rock Springs Capital Management, and AQR Capital Management 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 Chilton Investment Company allocated the biggest weight to IDEXX Laboratories, Inc. (NASDAQ:IDXX), around 1.46% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 1.23 percent of its 13F equity portfolio to IDXX.
As industrywide interest jumped, key hedge funds have jumped into IDEXX Laboratories, Inc. (NASDAQ:IDXX) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in IDEXX Laboratories, Inc. (NASDAQ:IDXX). Arrowstreet Capital had $20 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $6.7 million position during the quarter. The other funds with new positions in the stock are Robert B. Gillam's McKinley Capital Management, Matthew Tewksbury's Stevens Capital Management, and Lee Ainslie's Maverick Capital.
Let's now take a look at hedge fund activity in other stocks similar to IDEXX Laboratories, Inc. (NASDAQ:IDXX). We will take a look at M&T Bank Corporation (NYSE:MTB), Corning Incorporated (NYSE:GLW), United Airlines Holdings Inc (NASDAQ:UAL), and ResMed Inc. (NYSE:RMD). This group of stocks' market values match IDXX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTB,32,1357139,0 GLW,35,221721,5 UAL,62,6947983,10 RMD,21,172399,-2 Average,37.5,2174811,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $2175 million. That figure was $540 million in IDXX's case. United Airlines Holdings Inc (NASDAQ:UAL) is the most popular stock in this table. On the other hand ResMed Inc. (NYSE:RMD) is the least popular one with only 21 bullish hedge fund positions. IDEXX Laboratories, Inc. (NASDAQ:IDXX) is not the least popular stock in this group but hedge fund interest is still below average. 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 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on IDXX as the stock returned -6% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.