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Hedge Funds Are Warming Up To Tractor Supply Company (TSCO)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Tractor Supply Company (NASDAQ:TSCO)? The smart money sentiment can provide an answer to this question.

Is Tractor Supply Company (NASDAQ:TSCO) worth your attention right now? Investors who are in the know are becoming more confident. The number of long hedge fund positions advanced by 2 lately. Our calculations also showed that TSCO isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a large number of metrics stock market investors use to analyze stocks. Two of the most underrated metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a significant margin (see the details here).

TSCO_oct2019

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the key hedge fund action encompassing Tractor Supply Company (NASDAQ:TSCO).

What does smart money think about Tractor Supply Company (NASDAQ:TSCO)?

Heading into the third quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in TSCO over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

CHILTON INVESTMENT COMPANY

The largest stake in Tractor Supply Company (NASDAQ:TSCO) was held by AQR Capital Management, which reported holding $134.5 million worth of stock at the end of March. It was followed by Two Sigma Advisors with a $112.6 million position. Other investors bullish on the company included Samlyn Capital, Arrowstreet Capital, and Millennium Management.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Tractor Supply Company (NASDAQ:TSCO) headfirst. Renaissance Technologies, assembled the biggest position in Tractor Supply Company (NASDAQ:TSCO). Renaissance Technologies had $32.6 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also made a $19.2 million investment in the stock during the quarter. The following funds were also among the new TSCO investors: Richard Chilton’s Chilton Investment Company, Paul Tudor Jones’s Tudor Investment Corp, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tractor Supply Company (NASDAQ:TSCO) but similarly valued. These stocks are DexCom, Inc. (NASDAQ:DXCM), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Akamai Technologies, Inc. (NASDAQ:AKAM), and Annaly Capital Management, Inc. (NYSE:NLY). This group of stocks’ market caps match TSCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DXCM 30 670521 -3
KOF 9 494995 0
AKAM 33 841204 5
NLY 21 224083 0
Average 23.25 557701 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $558 million. That figure was $653 million in TSCO’s case. Akamai Technologies, Inc. (NASDAQ:AKAM) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Tractor Supply Company (NASDAQ:TSCO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TSCO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TSCO were disappointed as the stock returned -16.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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