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How Did Tractor Supply Company (TSCO) Compare Against Top Hedge Fund Stocks in 2019?

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. What do these smart investors think about Tractor Supply Company (NASDAQ:TSCO)?

Tractor Supply Company (NASDAQ:TSCO) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that TSCO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Tractor Supply Company (NASDAQ:TSCO).

How have hedgies been trading Tractor Supply Company (NASDAQ:TSCO)?

Heading into the fourth quarter of 2019, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in TSCO a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Tractor Supply Company (NASDAQ:TSCO), which was worth $110.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $77.9 million worth of shares. Samlyn Capital, Renaissance Technologies, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Harvest Capital Strategies allocated the biggest weight to Tractor Supply Company (NASDAQ:TSCO), around 5.16% of its 13F portfolio. Park Presidio Capital is also relatively very bullish on the stock, designating 4.31 percent of its 13F equity portfolio to TSCO.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Park Presidio Capital, managed by Lee Hicks and Jan Koerner, established the biggest position in Tractor Supply Company (NASDAQ:TSCO). Park Presidio Capital had $36.6 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also initiated a $9.8 million position during the quarter. The other funds with brand new TSCO positions are Matthew Tewksbury’s Stevens Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Tractor Supply Company (NASDAQ:TSCO). We will take a look at TechnipFMC plc (NYSE:FTI), SVB Financial Group (NASDAQ:SIVB), Aramark (NYSE:ARMK), and Camden Property Trust (NYSE:CPT). This group of stocks’ market values resemble TSCO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTI 31 767800 6
SIVB 39 597276 13
ARMK 35 1297465 -1
CPT 20 316246 1
Average 31.25 744697 4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $745 million. That figure was $640 million in TSCO’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Camden Property Trust (NYSE:CPT) is the least popular one with only 20 bullish hedge fund positions. Tractor Supply Company (NASDAQ:TSCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 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 12% in 2019 (through December 23rd) 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 so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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