In this article we will check out the progression of hedge fund sentiment towards Teradata Corporation (NYSE:TDC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Teradata Corporation (NYSE:TDC) was in 24 hedge funds' portfolios at the end of the first quarter of 2020. TDC investors should be aware of a decrease in enthusiasm from smart money lately. There were 28 hedge funds in our database with TDC holdings at the end of the previous quarter. Our calculations also showed that TDC isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To the average investor there are tons of metrics market participants employ to value stocks. Some of the most under-the-radar metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform the S&P 500 by a significant amount (see the details here).
[caption id="attachment_255014" align="aligncenter" width="400"] Clint Carlson of Carlson Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to analyze the key hedge fund action regarding Teradata Corporation (NYSE:TDC).
How have hedgies been trading Teradata Corporation (NYSE:TDC)?
At Q1's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TDC 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, Cynthia Paul's Lynrock Lake has the most valuable position in Teradata Corporation (NYSE:TDC), worth close to $41.9 million, corresponding to 4.1% of its total 13F portfolio. Coming in second is Renaissance Technologies, holding a $35.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions contain John Overdeck and David Siegel's Two Sigma Advisors, Clint Carlson's Carlson Capital and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Teradata Corporation (NYSE:TDC), around 4.13% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, earmarking 1.18 percent of its 13F equity portfolio to TDC.
Because Teradata Corporation (NYSE:TDC) has experienced a decline in interest from hedge fund managers, it's safe to say that there was a specific group of hedge funds who sold off their positions entirely by the end of the first quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management sold off the largest stake of all the hedgies monitored by Insider Monkey, totaling about $27.9 million in stock. Anand Parekh's fund, Alyeska Investment Group, also dropped its stock, about $17.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks similar to Teradata Corporation (NYSE:TDC). We will take a look at MGE Energy, Inc. (NASDAQ:MGEE), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), Penske Automotive Group, Inc. (NYSE:PAG), and Cloudera, Inc. (NYSE:CLDR). This group of stocks' market values are similar to TDC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGEE,6,38970,-3 RARX,34,890266,6 PAG,19,69005,-10 CLDR,26,583741,4 Average,21.25,395496,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $172 million in TDC's case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 6 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. 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 13.9% in 2020 through June 10th but beat the market by 14.2 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 15.3% 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.
Disclosure: None. This article was originally published at Insider Monkey.