Hedge Funds Are Dumping TE Connectivity Ltd. (TEL)

In this article you are going to find out whether hedge funds think TE Connectivity Ltd. (NYSE:TEL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

TE Connectivity Ltd. (NYSE:TEL) has seen a decrease in hedge fund interest lately. Our calculations also showed that TEL 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.

Today there are tons of tools shareholders put to use to analyze their holdings. Two of the most useful tools are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outperform the S&P 500 by a superb margin (see the details here).

Third Point

Dan Loeb of Third Point

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the latest hedge fund action regarding TE Connectivity Ltd. (NYSE:TEL).

How have hedgies been trading TE Connectivity Ltd. (NYSE:TEL)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TEL over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Generation Investment Management held the most valuable stake in TE Connectivity Ltd. (NYSE:TEL), which was worth $474.6 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $268.7 million worth of shares. Rivulet Capital, AQR 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 LFL Advisers allocated the biggest weight to TE Connectivity Ltd. (NYSE:TEL), around 12.25% of its 13F portfolio. Rivulet Capital is also relatively very bullish on the stock, dishing out 8.45 percent of its 13F equity portfolio to TEL.

Because TE Connectivity Ltd. (NYSE:TEL) has faced falling interest from hedge fund managers, logic holds that there was a specific group of fund managers that slashed their positions entirely in the third quarter. Interestingly, Anand Parekh’s Alyeska Investment Group said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, comprising about $56.2 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $42.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 11 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to TE Connectivity Ltd. (NYSE:TEL). These stocks are American International Group Inc (NYSE:AIG), Verisign, Inc. (NASDAQ:VRSN), EOG Resources Inc (NYSE:EOG), and Zimmer Biomet Holdings Inc (NYSE:ZBH). This group of stocks’ market values are similar to TEL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIG 43 1473892 -9
VRSN 41 5645444 3
EOG 44 801052 1
ZBH 51 621129 -13
Average 44.75 2135379 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.75 hedge funds with bullish positions and the average amount invested in these stocks was $2135 million. That figure was $1381 million in TEL’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Verisign, Inc. (NASDAQ:VRSN) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks TE Connectivity Ltd. (NYSE:TEL) is even less popular than VRSN. Hedge funds clearly dropped the ball on TEL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on TEL as the stock returned 29.8% so far in the second quarter and outperformed the market by an even larger margin.

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