At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Tetra Tech, Inc. (NASDAQ:TTEK).
Is TTEK a good stock to buy? Tetra Tech, Inc. (NASDAQ:TTEK) has experienced an increase in hedge fund sentiment of late. Tetra Tech, Inc. (NASDAQ:TTEK) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. There were 19 hedge funds in our database with TTEK holdings at the end of June. Our calculations also showed that TTEK isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by 66 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.
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 15 best blue chip stocks to buy 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. 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 let’s take a peek at the fresh hedge fund action surrounding Tetra Tech, Inc. (NASDAQ:TTEK).
Do Hedge Funds Think TTEK Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the second quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in TTEK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Value Holdings LP was the largest shareholder of Tetra Tech, Inc. (NASDAQ:TTEK), with a stake worth $26.6 million reported as of the end of September. Trailing Value Holdings LP was Sandler Capital Management, which amassed a stake valued at $11.1 million. AQR Capital Management, GLG Partners, and Intrinsic Edge 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 Value Holdings LP allocated the biggest weight to Tetra Tech, Inc. (NASDAQ:TTEK), around 9.06% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, setting aside 1.87 percent of its 13F equity portfolio to TTEK.
As aggregate interest increased, specific money managers have jumped into Tetra Tech, Inc. (NASDAQ:TTEK) headfirst. Paloma Partners, managed by Donald Sussman, initiated the biggest position in Tetra Tech, Inc. (NASDAQ:TTEK). Paloma Partners had $1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new TTEK investors: Parvinder Thiara’s Athanor Capital, Mika Toikka’s AlphaCrest Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tetra Tech, Inc. (NASDAQ:TTEK) but similarly valued. These stocks are Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Sonoco Products Company (NYSE:SON), Blueprint Medicines Corporation (NASDAQ:BPMC), ITT Inc. (NYSE:ITT), BlackLine, Inc. (NASDAQ:BL), Eastgroup Properties Inc (NYSE:EGP), and Ingredion Incorporated (NYSE:INGR). This group of stocks’ market caps resemble TTEK’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $89 million in TTEK’s case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 bullish hedge fund positions. Tetra Tech, Inc. (NASDAQ:TTEK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TTEK is 64.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on TTEK as the stock returned 21.5% since the end of Q3 (through 12/14) 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.