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Is TER A Good Stock To Buy Now?

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·5 min read
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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Teradyne, Inc. (NASDAQ:TER).

Is TER a good stock to buy now? The smart money was becoming hopeful. The number of long hedge fund positions increased by 8 lately. Teradyne, Inc. (NASDAQ:TER) was in 42 hedge funds' portfolios at the end of September. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TER isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

At the moment there are many methods stock market investors put to use to assess their stock investments. A duo of the less known methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top investment managers can trounce their index-focused peers by a very impressive margin (see the details here).

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to review the new hedge fund action encompassing Teradyne, Inc. (NASDAQ:TER).

Do Hedge Funds Think TER Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in TER a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Teradyne, Inc. (NASDAQ:TER), with a stake worth $273.6 million reported as of the end of September. Trailing Renaissance Technologies was Alkeon Capital Management, which amassed a stake valued at $245 million. Arrowstreet Capital, Citadel Investment Group, and Polar 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 L2 Asset Management allocated the biggest weight to Teradyne, Inc. (NASDAQ:TER), around 1.53% of its 13F portfolio. Oribel Capital Management is also relatively very bullish on the stock, earmarking 1.39 percent of its 13F equity portfolio to TER.

As one would reasonably expect, some big names have jumped into Teradyne, Inc. (NASDAQ:TER) headfirst. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, initiated the biggest position in Teradyne, Inc. (NASDAQ:TER). Woodline Partners had $24.1 million invested in the company at the end of the quarter. Mikal Patel's Oribel Capital Management also initiated a $17 million position during the quarter. The following funds were also among the new TER investors: Dmitry Balyasny's Balyasny Asset Management, Jinghua Yan's TwinBeech Capital, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Teradyne, Inc. (NASDAQ:TER) but similarly valued. These stocks are Elanco Animal Health Incorporated (NYSE:ELAN), Tradeweb Markets Inc. (NASDAQ:TW), The J.M. Smucker Company (NYSE:SJM), Darden Restaurants, Inc. (NYSE:DRI), International Flavors & Fragrances Inc (NYSE:IFF), Essex Property Trust Inc (NYSE:ESS), and Logitech International SA (NASDAQ:LOGI). All of these stocks' market caps are similar to TER's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELAN,21,302734,-9 TW,24,297199,-9 SJM,31,763149,-7 DRI,41,1183411,-8 IFF,31,202593,0 ESS,28,549766,0 LOGI,15,406297,2 Average,27.3,529307,-4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $529 million. That figure was $1365 million in TER's case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Teradyne, Inc. (NASDAQ:TER) is more popular among hedge funds. Our overall hedge fund sentiment score for TER is 90. 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. 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 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on TER as the stock returned 49.5% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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