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Hedge Funds Never Been This Bullish On IDEXX Laboratories, Inc. (IDXX)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought IDEXX Laboratories, Inc. (NASDAQ:IDXX) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is IDEXX Laboratories, Inc. (NASDAQ:IDXX) a bargain? Hedge funds were buying. The number of long hedge fund positions rose by 9 lately. IDEXX Laboratories, Inc. (NASDAQ:IDXX) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IDXX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Kris Jenner - Rock Springs Capital

Kris Jenner of Rock Springs Capital Management

At Insider Monkey we scour multiple sources to uncover 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 and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s review the new hedge fund action surrounding IDEXX Laboratories, Inc. (NASDAQ:IDXX).

How have hedgies been trading IDEXX Laboratories, Inc. (NASDAQ:IDXX)?

At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IDXX over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in IDEXX Laboratories, Inc. (NASDAQ:IDXX). Select Equity Group has a $96.3 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $67.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Greg Poole’s Echo Street Capital Management. In terms of the portfolio weights assigned to each position Brasada Capital Management allocated the biggest weight to IDEXX Laboratories, Inc. (NASDAQ:IDXX), around 1.83% of its 13F portfolio. Night Owl Capital Management is also relatively very bullish on the stock, earmarking 1.21 percent of its 13F equity portfolio to IDXX.

As one would reasonably expect, some big names have been driving this bullishness. PDT Partners, managed by Peter Muller, established the biggest position in IDEXX Laboratories, Inc. (NASDAQ:IDXX). PDT Partners had $8.9 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also made a $5.9 million investment in the stock during the quarter. The other funds with brand new IDXX positions are Louis Bacon’s Moore Global Investments, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Let’s go over hedge fund activity in other stocks similar to IDEXX Laboratories, Inc. (NASDAQ:IDXX). We will take a look at Alcon Inc. (NYSE:ALC), CoStar Group Inc (NASDAQ:CSGP), MSCI Inc (NYSE:MSCI), Marriott International Inc (NASDAQ:MAR), ResMed Inc. (NYSE:RMD), SYSCO Corporation (NYSE:SYY), and Cintas Corporation (NASDAQ:CTAS). All of these stocks’ market caps match IDXX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALC 21 584000 -4
CSGP 50 2267394 10
MSCI 44 729558 15
MAR 48 2159338 1
RMD 25 224162 -8
SYY 42 2177488 7
CTAS 34 531899 -8
Average 37.7 1239120 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.7 hedge funds with bullish positions and the average amount invested in these stocks was $1239 million. That figure was $417 million in IDXX’s case. CoStar Group Inc (NASDAQ:CSGP) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 21 bullish hedge fund positions. IDEXX Laboratories, Inc. (NASDAQ:IDXX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IDXX is 72.8. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on IDXX as the stock returned 18.4% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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