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Were Hedge Funds Right About Piling Into IDEXX Laboratories (IDXX)?

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of IDEXX Laboratories, Inc. (NASDAQ:IDXX).

Is IDEXX Laboratories, Inc. (NASDAQ:IDXX) a buy right now? Money managers were in an optimistic mood. The number of bullish hedge fund bets moved up by 5 lately. IDEXX Laboratories, Inc. (NASDAQ:IDXX) was in 46 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IDXX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Kris Jenner - Rock Springs Capital
Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's check out the fresh hedge fund action encompassing IDEXX Laboratories, Inc. (NASDAQ:IDXX).

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

At fourth quarter's end, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. On the other hand, there were a total of 37 hedge funds with a bullish position in IDXX a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Fundsmith LLP, managed by Terry Smith, holds the largest position in IDEXX Laboratories, Inc. (NASDAQ:IDXX). Fundsmith LLP has a $2.1127 billion position in the stock, comprising 7% of its 13F portfolio. The second largest stake is held by Select Equity Group, led by Robert Joseph Caruso, holding a $106.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Greg Poole's Echo Street Capital Management, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Fundsmith LLP allocated the biggest weight to IDEXX Laboratories, Inc. (NASDAQ:IDXX), around 7% of its 13F portfolio. Montanaro Asset Management is also relatively very bullish on the stock, setting aside 5.08 percent of its 13F equity portfolio to IDXX.

As one would reasonably expect, key hedge funds were breaking ground themselves. Montanaro Asset Management, managed by Charles Montanaro, established the biggest position in IDEXX Laboratories, Inc. (NASDAQ:IDXX). Montanaro Asset Management had $30.1 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $9.2 million position during the quarter. The other funds with new positions in the stock are Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Matthew Hulsizer's PEAK6 Capital Management, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as IDEXX Laboratories, Inc. (NASDAQ:IDXX) but similarly valued. We will take a look at Constellation Brands, Inc. (NYSE:STZ), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), The Kraft Heinz Company (NASDAQ:KHC), Metlife Inc (NYSE:MET), Roku, Inc. (NASDAQ:ROKU), Align Technology, Inc. (NASDAQ:ALGN), and Electronic Arts Inc. (NASDAQ:EA). This group of stocks' market valuations resemble IDXX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STZ,58,1768371,5 SMFG,10,92749,2 KHC,36,11558217,-3 MET,37,983027,1 ROKU,60,3237943,1 ALGN,50,2480630,3 EA,50,1050954,-12 Average,43,3024556,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $3025 million. That figure was $2698 million in IDXX's case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. IDEXX Laboratories, Inc. (NASDAQ:IDXX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IDXX is 76. 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. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately IDXX wasn't nearly as popular as these 10 stocks and hedge funds that were betting on IDXX were disappointed as the stock returned 9.8% since the end of December (through 4/30) 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 since 2019.

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

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