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 second quarter. One of these stocks was TE Connectivity Ltd. (NYSE:TEL).
Is TE Connectivity Ltd. (NYSE:TEL) a cheap investment now? The smart money is taking an optimistic view. The number of bullish hedge fund positions improved by 3 lately. Our calculations also showed that TEL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). TEL was in 30 hedge funds' portfolios at the end of September. There were 27 hedge funds in our database with TEL 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.
To most traders, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, Our experts look at the leaders of this group, about 750 funds. Most estimates calculate that this group of people oversee the majority of all hedge funds' total asset base, and by tracking their top equity investments, Insider Monkey has determined numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_189672" align="aligncenter" width="450"] David Blood of Generation Investment Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the key hedge fund action encompassing TE Connectivity Ltd. (NYSE:TEL).
How have hedgies been trading TE Connectivity Ltd. (NYSE:TEL)?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2019. By comparison, 30 hedge funds held shares or bullish call options in TEL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of TE Connectivity Ltd. (NYSE:TEL), with a stake worth $425.8 million reported as of the end of September. Trailing Generation Investment Management was First Pacific Advisors, which amassed a stake valued at $347.9 million. Impax Asset Management, AQR Capital Management, and Rivulet 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 Rivulet Capital allocated the biggest weight to TE Connectivity Ltd. (NYSE:TEL), around 9.2% of its portfolio. First Pacific Advisors is also relatively very bullish on the stock, designating 3.28 percent of its 13F equity portfolio to TEL.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in TE Connectivity Ltd. (NYSE:TEL). Arrowstreet Capital had $16.2 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith's Laurion Capital Management, Bruce Kovner's Caxton Associates, and Matthew Hulsizer's PEAK6 Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as TE Connectivity Ltd. (NYSE:TEL) but similarly valued. These stocks are Newmont Goldcorp Corp (NYSE:NEM), Canadian Pacific Railway Limited (NYSE:CP), The Royal Bank of Scotland Group plc (NYSE:RBS), and Barrick Gold Corporation (NYSE:GOLD). This group of stocks' market values resemble TEL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NEM,41,868131,0 CP,31,1781495,1 RBS,5,29381,-1 GOLD,42,1443824,3 Average,29.75,1030708,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $1031 million. That figure was $1265 million in TEL's case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand The Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 5 bullish hedge fund positions. TE Connectivity Ltd. (NYSE:TEL) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TEL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TEL were disappointed as the stock returned 0% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.