Is TSCO Stock A Buy or Sell?

At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Tractor Supply Company (NASDAQ:TSCO) makes for a good investment right now.

Is TSCO stock a buy or sell? The best stock pickers were turning less bullish. The number of long hedge fund bets were trimmed by 9 lately. Tractor Supply Company (NASDAQ:TSCO) was in 39 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 48. Our calculations also showed that TSCO isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to review the key hedge fund action encompassing Tractor Supply Company (NASDAQ:TSCO).

Do Hedge Funds Think TSCO Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TSCO over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Is TSCO A Good Stock To Buy?

Among these funds, Select Equity Group held the most valuable stake in Tractor Supply Company (NASDAQ:TSCO), which was worth $492.8 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $111.9 million worth of shares. Two Sigma Advisors, Balyasny Asset Management, and Arrowstreet Capital 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 Park Presidio Capital allocated the biggest weight to Tractor Supply Company (NASDAQ:TSCO), around 3.12% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 2.02 percent of its 13F equity portfolio to TSCO.

Seeing as Tractor Supply Company (NASDAQ:TSCO) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that slashed their full holdings in the fourth quarter. Intriguingly, John Armitage’s Egerton Capital Limited dumped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $100.6 million in stock. Robert Pohly’s fund, Samlyn Capital, also cut its stock, about $7.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 9 funds in the fourth quarter.

Let’s check out hedge fund activity in other stocks similar to Tractor Supply Company (NASDAQ:TSCO). We will take a look at Sun Communities Inc (NYSE:SUI), Solaredge Technologies Inc (NASDAQ:SEDG), M&T Bank Corporation (NYSE:MTB), Nomura Holdings, Inc. (NYSE:NMR), Avantor, Inc. (NYSE:AVTR), Healthpeak Properties, Inc. (NYSE:PEAK), and Hess Corporation (NYSE:HES). All of these stocks’ market caps are similar to TSCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SUI 27 600763 -4
SEDG 28 458949 -3
MTB 33 382587 -2
NMR 6 17627 0
AVTR 56 2218872 0
PEAK 22 262480 0
HES 33 366330 -2
Average 29.3 615373 -1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $615 million. That figure was $1179 million in TSCO’s case. Avantor, Inc. (NYSE:AVTR) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 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. Our overall hedge fund sentiment score for TSCO is 53.4. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on TSCO as the stock returned 23.4% since the end of Q4 (through 3/19) 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.