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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Tractor Supply Company (NASDAQ:TSCO) changed recently.
Is TSCO a good stock to buy now? Tractor Supply Company (NASDAQ:TSCO) shareholders have witnessed an increase in support from the world's most elite money managers of late. Tractor Supply Company (NASDAQ:TSCO) was in 48 hedge funds' portfolios at the end of September. The all time high for this statistic is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 38 hedge funds in our database with TSCO positions at the end of the second quarter. Our calculations also showed that TSCO 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Armitage of Egerton 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 cannabis tech 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 take a look at the key hedge fund action encompassing Tractor Supply Company (NASDAQ:TSCO).
Do Hedge Funds Think TSCO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TSCO over the last 21 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Select Equity Group held the most valuable stake in Tractor Supply Company (NASDAQ:TSCO), which was worth $321.1 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $147 million worth of shares. Two Sigma Advisors, Egerton Capital Limited, and Marshall Wace LLP 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 Park Presidio Capital allocated the biggest weight to Tractor Supply Company (NASDAQ:TSCO), around 5.34% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, dishing out 1.83 percent of its 13F equity portfolio to TSCO.
As aggregate interest increased, key hedge funds were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, established the most valuable position in Tractor Supply Company (NASDAQ:TSCO). Holocene Advisors had $84.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $58.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Robert Pohly's Samlyn Capital, Brian Scudieri's Kehrs Ridge Capital, and Jinghua Yan's TwinBeech Capital.
Let's check out hedge fund activity in other stocks similar to Tractor Supply Company (NASDAQ:TSCO). We will take a look at Fox Corporation (NASDAQ:FOXA), iQIYI, Inc. (NASDAQ:IQ), BioNTech SE (NASDAQ:BNTX), ORIX Corporation (NYSE:IX), MPLX LP (NYSE:MPLX), StoneCo Ltd. (NASDAQ:STNE), and Trip.com Group Limited (NASDAQ:TCOM). This group of stocks' market caps are closest to TSCO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FOXA,32,1505885,-3 IQ,18,1132945,1 BNTX,17,218302,2 IX,4,4093,0 MPLX,14,91155,1 STNE,38,2294511,3 TCOM,30,1525963,1 Average,21.9,967551,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $968 million. That figure was $1421 million in TSCO's case. StoneCo Ltd. (NASDAQ:STNE) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Tractor Supply Company (NASDAQ:TSCO) is more popular among hedge funds. Our overall hedge fund sentiment score for TSCO 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately TSCO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TSCO were disappointed as the stock returned -4.4% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.