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Where Do Hedge Funds Stand On The Toro Company (TTC)?

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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. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 30th, 2021. What do these smart investors think about The Toro Company (NYSE:TTC)?

Hedge fund interest in The Toro Company (NYSE:TTC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TTC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Newell Brands Inc. (NYSE:NWL), Molson Coors Beverage Company (NYSE:TAP), and BorgWarner Inc. (NYSE:BWA) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Fred DiSanto Ancora Advisors
Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover 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 EV 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 surrounding The Toro Company (NYSE:TTC).

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

At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in TTC a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in The Toro Company (NYSE:TTC) was held by Select Equity Group, which reported holding $522.2 million worth of stock at the end of June. It was followed by Impax Asset Management with a $187.8 million position. Other investors bullish on the company included Fisher Asset Management, Chilton Investment Company, and AQR Capital Management. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to The Toro Company (NYSE:TTC), around 3.41% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, setting aside 3.24 percent of its 13F equity portfolio to TTC.

Seeing as The Toro Company (NYSE:TTC) has experienced declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of funds that elected to cut their entire stakes in the second quarter. Interestingly, Peter Muller's PDT Partners sold off the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $6.9 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $1.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Toro Company (NYSE:TTC) but similarly valued. These stocks are Newell Brands Inc. (NASDAQ:NWL), Molson Coors Beverage Company (NYSE:TAP), BorgWarner Inc. (NYSE:BWA), Zynga Inc (NASDAQ:ZNGA), A. O. Smith Corporation (NYSE:AOS), AMERCO (NASDAQ:UHAL), and Cable One Inc (NYSE:CABO). This group of stocks' market values are similar to TTC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NWL,25,2028252,1 TAP,39,519321,5 BWA,27,567604,0 ZNGA,49,1270452,2 AOS,26,584108,2 UHAL,21,817145,-2 CABO,20,703195,-3 Average,29.6,927154,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $927 million. That figure was $976 million in TTC's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Cable One Inc (NYSE:CABO) is the least popular one with only 20 bullish hedge fund positions. The Toro Company (NYSE:TTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TTC is 55.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately TTC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on TTC were disappointed as the stock returned -11.1% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.