Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Tech Data Corp (NASDAQ:TECD) ready to rally soon? Money managers are thoroughly getting more bullish. The number of long hedge fund investments increased by 6 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Spirit Airlines Incorporated (NASDAQ:SAVE), Owens-Illinois Inc (NYSE:OI), and John Wiley & Sons Inc (NYSE:JW) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
How are hedge funds trading Tech Data Corp (NASDAQ:TECD)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 38% rise from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TECD over the last 5 quarters, which shows hedge fund sentiment rebounding after declines in late-2015/early-2016. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, led by Cliff Asness, holds the most valuable position in Tech Data Corp (NASDAQ:TECD). AQR Capital Management has a $142.7 million position in the stock. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $31.2 million position. Remaining hedge funds and institutional investors that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Anand Parekh’s Alyeska Investment Group, and Clint Carlson’s Carlson Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.