Hedge Funds Are Cashing Out Of Teradyne, Inc. (TER)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Teradyne, Inc. (NYSE:TER).

Is Teradyne, Inc. (NYSE:TER) a great investment today? Investors who are in the know were getting less bullish. The number of long hedge fund positions decreased by 3 lately. Teradyne, Inc. (NYSE:TER) was in 44 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. Our calculations also showed that TER isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 47 hedge funds in our database with TER holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a peek at the new hedge fund action surrounding Teradyne, Inc. (NYSE:TER).

Do Hedge Funds Think TER Is A Good Stock To Buy Now?

At Q1’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in TER a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Alkeon Capital Management held the most valuable stake in Teradyne, Inc. (NYSE:TER), which was worth $485.5 million at the end of the fourth quarter. On the second spot was ARK Investment Management which amassed $350.1 million worth of shares. D E Shaw, Arrowstreet Capital, and AQR 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 Newbrook Capital Advisors allocated the biggest weight to Teradyne, Inc. (NYSE:TER), around 4.04% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, designating 1.94 percent of its 13F equity portfolio to TER.

Because Teradyne, Inc. (NYSE:TER) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who were dropping their positions entirely in the first quarter. It’s worth mentioning that Brian Ashford-Russell and Tim Woolley’s Polar Capital cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $52.7 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also sold off its stock, about $13.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Teradyne, Inc. (NYSE:TER). We will take a look at Vipshop Holdings Limited (NYSE:VIPS), Fortis Inc. (NYSE:FTS), Cheniere Energy Partners LP (NYSE:CQP), Entergy Corporation (NYSE:ETR), Ventas, Inc. (NYSE:VTR), Restaurant Brands International Inc (NYSE:QSR), and Regions Financial Corporation (NYSE:RF). All of these stocks’ market caps are similar to TER’s market cap.

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As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $735 million. That figure was $1588 million in TER’s case. Vipshop Holdings Limited (NYSE:VIPS) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 2 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. Our overall hedge fund sentiment score for TER is 70.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately TER wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TER were disappointed as the stock returned 2.7% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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