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Is IDEXX Laboratories, Inc. (IDXX) A Good Stock To Buy?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of IDEXX Laboratories, Inc. (NASDAQ:IDXX).

IDEXX Laboratories, Inc. (NASDAQ:IDXX) has seen a decrease in support from the world’s most elite money managers of late. Our calculations also showed that IDXX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 51 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.

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the new hedge fund action surrounding IDEXX Laboratories, Inc. (NASDAQ:IDXX).

How are hedge funds trading IDEXX Laboratories, Inc. (NASDAQ:IDXX)?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IDXX over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the largest position in IDEXX Laboratories, Inc. (NASDAQ:IDXX), worth close to $170 million, comprising 1.2% of its total 13F portfolio. The second largest stake is Renaissance Technologies, with a $85.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, Noam Gottesman’s GLG Partners and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs 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 1.7% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 1.25 percent of its 13F equity portfolio to IDXX.

Judging by the fact that IDEXX Laboratories, Inc. (NASDAQ:IDXX) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there exists a select few fund managers who sold off their positions entirely by the end of the first quarter. At the top of the heap, D. E. Shaw’s D E Shaw dumped the largest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $19 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $6.7 million worth. These moves are important to note, as aggregate hedge fund interest fell by 6 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to IDEXX Laboratories, Inc. (NASDAQ:IDXX). These stocks are Yum! Brands, Inc. (NYSE:YUM), Johnson Controls International plc (NYSE:JCI), Kellogg Company (NYSE:K), and Waste Connections, Inc. (NYSE:WCN). This group of stocks’ market valuations are similar to IDXX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
YUM 41 558913 5
JCI 37 1063858 0
K 37 610512 7
WCN 33 464735 -4
Average 37 674505 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $675 million. That figure was $517 million in IDXX’s case. Yum! Brands, Inc. (NYSE:YUM) is the most popular stock in this table. On the other hand Waste Connections, Inc. (NYSE:WCN) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks IDEXX Laboratories, Inc. (NASDAQ:IDXX) is even less popular than WCN. Hedge funds clearly dropped the ball on IDXX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on IDXX as the stock returned 27.5% so far in the second quarter and outperformed the market by an even larger margin.

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