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Did Hedge Funds Make The Right Call On Tetra Tech, Inc. (TTEK) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Tetra Tech, Inc. (NASDAQ:TTEK) based on that data and determine whether they were really smart about the stock.

Is Tetra Tech, Inc. (NASDAQ:TTEK) a buy right now? Prominent investors were getting less bullish. The number of bullish hedge fund positions were cut by 2 recently. Our calculations also showed that TTEK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are assumed to be unimportant, old investment vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Our experts look at the leaders of this club, about 850 funds. These money managers handle most of the smart money’s total capital, and by watching their highest performing investments, Insider Monkey has formulated many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Andrew Sandler of Sandler Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to review the new hedge fund action regarding Tetra Tech, Inc. (NASDAQ:TTEK).

How are hedge funds trading Tetra Tech, Inc. (NASDAQ:TTEK)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TTEK over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Tetra Tech, Inc. (NASDAQ:TTEK), which was worth $24.6 million at the end of the third quarter. On the second spot was Value Holdings LP which amassed $19.7 million worth of shares. Sandler Capital Management, Renaissance Technologies, and Columbus Circle Investors 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 Value Holdings LP allocated the biggest weight to Tetra Tech, Inc. (NASDAQ:TTEK), around 9.36% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, setting aside 1.49 percent of its 13F equity portfolio to TTEK.

Due to the fact that Tetra Tech, Inc. (NASDAQ:TTEK) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who were dropping their full holdings last quarter. Interestingly, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.5 million in stock, and Mika Toikka’s AlphaCrest Capital Management was right behind this move, as the fund sold off about $1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tetra Tech, Inc. (NASDAQ:TTEK) but similarly valued. These stocks are Plains All American Pipeline, L.P. (NYSE:PAA), Allison Transmission Holdings Inc (NYSE:ALSN), Cirrus Logic, Inc. (NASDAQ:CRUS), and Tandem Diabetes Care Inc (NASDAQ:TNDM). This group of stocks’ market values are similar to TTEK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PAA 8 44850 -4
ALSN 27 404743 -6
CRUS 28 286330 3
TNDM 28 245964 -11
Average 22.75 245472 -4.5

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 $245 million. That figure was $116 million in TTEK’s case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 8 bullish hedge fund positions. Tetra Tech, Inc. (NASDAQ:TTEK) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately TTEK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TTEK investors were disappointed as the stock returned 22.2% since Q1 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 most of these stocks already outperformed the market in 2020.

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