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Hedge Funds Pulled The Trigger On Tetra Tech, Inc. (TTEK) A Bit Too Early

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Tetra Tech, Inc. (NASDAQ:TTEK).

Tetra Tech, Inc. (NASDAQ:TTEK) was in 22 hedge funds’ portfolios at the end of June. TTEK shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 23 hedge funds in our database with TTEK holdings at the end of the previous quarter. Our calculations also showed that TTEK 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TTEK_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. We’re going to check out the key hedge fund action regarding Tetra Tech, Inc. (NASDAQ:TTEK).

How have hedgies been trading Tetra Tech, Inc. (NASDAQ:TTEK)?

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TTEK over the last 16 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Andrew Sandler

Among these funds, GLG Partners held the most valuable stake in Tetra Tech, Inc. (NASDAQ:TTEK), which was worth $22.2 million at the end of the second quarter. On the second spot was Columbus Circle Investors which amassed $14.5 million worth of shares. Moreover, Sandler Capital Management, SG Capital Management, and AQR Capital Management were also bullish on Tetra Tech, Inc. (NASDAQ:TTEK), allocating a large percentage of their portfolios to this stock.

Since Tetra Tech, Inc. (NASDAQ:TTEK) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $1.1 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks similar to Tetra Tech, Inc. (NASDAQ:TTEK). These stocks are Littelfuse, Inc. (NASDAQ:LFUS), Assured Guaranty Ltd. (NYSE:AGO), Marriott Vacations Worldwide Corporation (NYSE:VAC), and Sterling Bancorp (NYSE:STL). This group of stocks’ market valuations are similar to TTEK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LFUS 15 268202 2
AGO 36 613916 2
VAC 27 442811 1
STL 21 472824 2
Average 24.75 449438 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $449 million. That figure was $102 million in TTEK’s case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand Littelfuse, Inc. (NASDAQ:LFUS) is the least popular one with only 15 bullish hedge fund positions. Tetra Tech, Inc. (NASDAQ:TTEK) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on TTEK as the stock returned 10.7% during the same time frame and outperformed the market by an even larger margin.

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

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