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2019 Review: Top Hedge Fund Stocks vs. Teleflex Incorporated (TFX)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Teleflex Incorporated (NYSE:TFX).

Is Teleflex Incorporated (NYSE:TFX) a good stock to buy now? The smart money is in a bullish mood. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that TFX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). TFX was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with TFX holdings at the end of the previous quarter.

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. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let’s check out the fresh hedge fund action encompassing Teleflex Incorporated (NYSE:TFX).

How are hedge funds trading Teleflex Incorporated (NYSE:TFX)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in TFX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Marshall Wace was the largest shareholder of Teleflex Incorporated (NYSE:TFX), with a stake worth $282.7 million reported as of the end of September. Trailing Marshall Wace was Select Equity Group, which amassed a stake valued at $220.4 million. Alyeska Investment Group, Rock Springs Capital Management, and Polar Capital 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 Marshall Wace allocated the biggest weight to Teleflex Incorporated (NYSE:TFX), around 2.22% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, dishing out 1.76 percent of its 13F equity portfolio to TFX.

As aggregate interest increased, key hedge funds were breaking ground themselves. Columbus Circle Investors, managed by Principal Global Investors, created the biggest position in Teleflex Incorporated (NYSE:TFX). Columbus Circle Investors had $8.7 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $3.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Lee Ainslie’s Maverick Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Teleflex Incorporated (NYSE:TFX) but similarly valued. These stocks are Maxim Integrated Products Inc. (NASDAQ:MXIM), Evergy, Inc. (NYSE:EVRG), Loews Corporation (NYSE:L), and Deutsche Bank AG (NYSE:DB). All of these stocks’ market caps match TFX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MXIM 29 249444 1
EVRG 25 866687 0
L 25 224303 4
DB 12 983289 1
Average 22.75 580931 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $581 million. That figure was $768 million in TFX’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Deutsche Bank AG (NYSE:DB) is the least popular one with only 12 bullish hedge fund positions. Teleflex Incorporated (NYSE:TFX) is not the most popular stock in this group but hedge fund interest is still above average. 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 10.1 percentage points. Hedge funds were also right about betting on TFX as the stock returned 46.3% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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