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Hedge Funds Never Been This Bullish On Teledyne Technologies Incorporated (TDY)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Teledyne Technologies Incorporated (NYSE:TDY) and determine whether hedge funds skillfully traded this stock.

Is Teledyne Technologies Incorporated (NYSE:TDY) a buy here? The smart money was becoming more confident. The number of long hedge fund bets went up by 13 lately. Teledyne Technologies Incorporated (NYSE:TDY) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TDY 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. 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. With all of this in mind we’re going to analyze the recent hedge fund action encompassing Teledyne Technologies Incorporated (NYSE:TDY).

What does smart money think about Teledyne Technologies Incorporated (NYSE:TDY)?

At second quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 62% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TDY over the last 20 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

The largest stake in Teledyne Technologies Incorporated (NYSE:TDY) was held by Fisher Asset Management, which reported holding $68.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $59.4 million position. Other investors bullish on the company included Millennium Management, East Side Capital (RR Partners), and Scopus Asset Management. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to Teledyne Technologies Incorporated (NYSE:TDY), around 8.09% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, dishing out 2.6 percent of its 13F equity portfolio to TDY.

Now, key money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Teledyne Technologies Incorporated (NYSE:TDY). Balyasny Asset Management had $16.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $16.5 million investment in the stock during the quarter. The following funds were also among the new TDY investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Donald Sussman’s Paloma Partners, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks similar to Teledyne Technologies Incorporated (NYSE:TDY). These stocks are Black Knight, Inc. (NYSE:BKI), Halliburton Company (NYSE:HAL), Equity Lifestyle Properties, Inc. (NYSE:ELS), Principal Financial Group Inc (NASDAQ:PFG), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Waters Corporation (NYSE:WAT), and Varian Medical Systems, Inc. (NYSE:VAR). This group of stocks’ market values are similar to TDY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKI 44 595730 12
HAL 30 717639 -2
ELS 31 442219 0
PFG 31 188356 4
NBIX 38 1195826 0
WAT 38 615214 13
VAR 27 586063 2
Average 34.1 620150 4.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $620 million. That figure was $446 million in TDY’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Varian Medical Systems, Inc. (NYSE:VAR) is the least popular one with only 27 bullish hedge fund positions. Teledyne Technologies Incorporated (NYSE:TDY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TDY is 60.6. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market by 23.2 percentage points. Unfortunately TDY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TDY investors were disappointed as the stock returned 0.9% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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