Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Teradyne, Inc. (NYSE:TER) was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. TER has experienced an increase in hedge fund sentiment lately. There were 21 hedge funds in our database with TER positions at the end of the previous quarter. At the end of this article we will also compare TER to other stocks including Dunkin Brands Group Inc (NASDAQ:DNKN), Arris Group, Inc. (NASDAQ:ARRS), and Validus Holdings, Ltd. (NYSE:VR) to get a better sense of its popularity.
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.
Keeping this in mind, we’re going to take a look at the recent action surrounding Teradyne, Inc. (NYSE:TER).
Hedge fund activity in Teradyne, Inc. (NYSE:TER)
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 14% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the number one position in Teradyne, Inc. (NYSE:TER), worth close to $76.9 million, corresponding to 0.1% of its total 13F portfolio. On AQR Capital Management’s heels is Royce & Associates, managed by Chuck Royce, which holds a $74.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish contain Panayotis Takis Sparaggis’s Alkeon Capital Management, Jim Simons’s Renaissance Technologies and D. E. Shaw’s D E Shaw.
As industrywide interest jumped, some big names have been driving this bullishness. Gotham Asset Management, managed by Joel Greenblatt, created the most outsized position in Teradyne, Inc. (NYSE:TER). According to regulatory filings, the fund had $9.7 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital also initiated a $2.6 million position during the quarter. The following funds were also among the new TER investors: Neil Chriss’s Hutchin Hill Capital, Paul Tudor Jones’s Tudor Investment Corp, and Brian Taylor’s Pine River Capital Management.
Let’s check out hedge fund activity in other stocks similar to Teradyne, Inc. (NYSE:TER). These stocks are Dunkin Brands Group Inc (NASDAQ:DNKN), Arris Group, Inc. (NASDAQ:ARRS), Validus Holdings, Ltd. (NYSE:VR), and Bright Horizons Family Solutions Inc (NYSE:BFAM). This group of stocks’ market caps resemble TER’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $348 million in TER’s case. Arris Group, Inc. (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Bright Horizons Family Solutions Inc (NYSE:BFAM) is the least popular one with only 12 bullish hedge fund positions. Teradyne, Inc. (NYSE:TER) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ARRS might be a better candidate to consider a long position.