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Hedge Fund Consensus Stocks vs. IDEXX Laboratories, Inc. (IDXX) In 2019

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like IDEXX Laboratories, Inc. (NASDAQ:IDXX) and compare its performance against hedge funds’ favorite stocks.

IDEXX Laboratories, Inc. (NASDAQ:IDXX) has seen a decrease in hedge fund sentiment of late. Our calculations also showed that IDXX 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).

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

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. With all of this in mind let’s take a gander at the fresh hedge fund action regarding IDEXX Laboratories, Inc. (NASDAQ:IDXX).

How are hedge funds trading IDEXX Laboratories, Inc. (NASDAQ:IDXX)?

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards IDXX over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in IDEXX Laboratories, Inc. (NASDAQ:IDXX), which was worth $170.5 million at the end of the third quarter. On the second spot was GLG Partners which amassed $104.8 million worth of shares. Chilton Investment Company, Rock Springs Capital Management, and Adage Capital Management 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 Chilton Investment Company allocated the biggest weight to IDEXX Laboratories, Inc. (NASDAQ:IDXX), around 2.19% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 1.3 percent of its 13F equity portfolio to IDXX.

Seeing as IDEXX Laboratories, Inc. (NASDAQ:IDXX) has experienced bearish sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that slashed their entire stakes by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth close to $11.6 million in stock, and Bruce Kovner’s Caxton Associates was right behind this move, as the fund sold off about $9.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 8 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to IDEXX Laboratories, Inc. (NASDAQ:IDXX). These stocks are Hormel Foods Corporation (NYSE:HRL), Entergy Corporation (NYSE:ETR), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Parker-Hannifin Corporation (NYSE:PH). This group of stocks’ market values resemble IDXX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRL 19 190410 3
ETR 25 1677907 -5
CMG 38 4057541 1
PH 25 803965 -1
Average 26.75 1682456 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1682 million. That figure was $509 million in IDXX’s case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 19 bullish hedge fund positions. IDEXX Laboratories, Inc. (NASDAQ:IDXX) 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 IDXX, though not to the same extent, as the stock returned 40.4% during 2019 and outperformed the market as well.
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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