Did Hedge Funds Drop The Ball On Teledyne Technologies Incorporated (TDY) ?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Teledyne Technologies Incorporated (NYSE:TDY) investors should be aware of a decrease in hedge fund sentiment in recent months. TDY was in 26 hedge funds’ portfolios at the end of June. There were 28 hedge funds in our database with TDY holdings at the end of the previous quarter. Our calculations also showed that TDY isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.


Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the fresh hedge fund action encompassing Teledyne Technologies Incorporated (NYSE:TDY).

What have hedge funds been doing with Teledyne Technologies Incorporated (NYSE:TDY)?

Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TDY over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Paul Marshall Marshall Wace

More specifically, AQR Capital Management was the largest shareholder of Teledyne Technologies Incorporated (NYSE:TDY), with a stake worth $197.3 million reported as of the end of March. Trailing AQR Capital Management was Cardinal Capital, which amassed a stake valued at $99.4 million. Fisher Asset Management, Select Equity Group, and Scopus Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Teledyne Technologies Incorporated (NYSE:TDY) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few fund managers that elected to cut their entire stakes by the end of the second quarter. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $19.4 million in stock. Andrew Feldstein and Stephen Siderow’s fund, Blue Mountain Capital, also dropped its stock, about $5.9 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Teledyne Technologies Incorporated (NYSE:TDY). We will take a look at Alleghany Corporation (NYSE:Y), Avantor, Inc. (NYSE:AVTR), Mylan N.V. (NASDAQ:MYL), and Zendesk Inc (NYSE:ZEN). This group of stocks’ market values are closest to TDY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
Y 26 361790 3
AVTR 30 1081752 30
MYL 30 1601252 0
ZEN 50 1843391 -3
Average 34 1222046 7.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1222 million. That figure was $643 million in TDY’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Alleghany Corporation (NYSE:Y) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Teledyne Technologies Incorporated (NYSE:TDY) is even less popular than Y. Hedge funds clearly dropped the ball on TDY as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on TDY as the stock returned 17.6% during the third quarter and outperformed the market by an even larger margin.

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