Is Tesco Corporation (USA) (TESO) A Good Stock To Buy?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Tesco Corporation (USA) (NASDAQ:TESO).

Tesco Corporation (USA) (NASDAQ:TESO) was included in the equity portfolios of seven funds from the Insider Monkey database at the end of the third quarter of 2016. TESO experienced a decrease in activity from the smart money investors last quarter. 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 PennyMac Financial Services Inc (NYSE:PFSI), AV Homes Inc (NASDAQ:AVHI), and Steel Partners Holdings LP (NYSE:SPLP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, we’re going to take a peek at the key action encompassing Tesco Corporation (USA) (NASDAQ:TESO).

What does the smart money think about Tesco Corporation (USA) (NASDAQ:TESO)?

At Q3’s end, a total of seven of the hedge funds tracked by Insider Monkey held long positions in this stock, down by four from the previous quarter. On the other hand, there were eight funds with a bullish position in TESO at the beginning of this year. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Dmitry Balyasny’s Balyasny Asset Management has the largest position in Tesco Corporation (USA) (NASDAQ:TESO), worth close to $23 million, amounting to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Cove Street Capital, led by Jeffrey Bronchick, holding a $8.8 million position; 0.9% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain Chuck Royce’s Royce & Associates, Renaissance Technologies, one of the largest hedge funds in the world, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Tesco Corporation (USA) (NASDAQ:TESO) has sustained falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP cashed in the biggest position of all the investors tracked by Insider Monkey, worth about $2.4 million in stock, and Paul Tudor Jones’ Tudor Investment Corp was right behind this move, as the fund sold off about $0.2 million worth of shares.

Let’s check out hedge fund activity in other stocks similar to Tesco Corporation (USA) (NASDAQ:TESO). These stocks are PennyMac Financial Services Inc (NYSE:PFSI), AV Homes Inc (NASDAQ:AVHI), Steel Partners Holdings LP (NYSE:SPLP), and Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI). This group of stocks’ market values are closest to TESO’s market value.

As you can see these stocks had an average of nine funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $41 million in TESO’s case. PennyMac Financial Services Inc (NYSE:PFSI) is the most popular stock in this table. On the other hand AV Homes Inc (NASDAQ:AVHI) is the least popular one with only three bullish hedge fund positions. Tesco Corporation (USA) (NASDAQ:TESO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PFSI might be a better candidate to consider taking a long position in.

Disclosure: none