Should I Buy Teradata Corporation (TDC)?

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 Teradata Corporation (NYSE:TDC).

Teradata Corporation (NYSE:TDC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of March. Our calculations also showed that TDC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare TDC to other stocks including John Bean Technologies Corporation (NYSE:JBT), AdaptHealth Corp. (NASDAQ:AHCO), and World Wrestling Entertainment, Inc. (NYSE:WWE) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a glance at the latest hedge fund action encompassing Teradata Corporation (NYSE:TDC).

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

At the end of March, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in TDC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Teradata Corporation (NYSE:TDC) was held by Lynrock Lake, which reported holding $186.9 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $51.7 million position. Other investors bullish on the company included Two Sigma Advisors, Alyeska Investment Group, and Empyrean Capital Partners. In terms of the portfolio weights assigned to each position Andar Capital allocated the biggest weight to Teradata Corporation (NYSE:TDC), around 20.08% of its 13F portfolio. Lynrock Lake is also relatively very bullish on the stock, earmarking 12.21 percent of its 13F equity portfolio to TDC.

Due to the fact that Teradata Corporation (NYSE:TDC) has experienced falling interest from the smart money, logic holds that there were a few hedge funds that elected to cut their full holdings in the first quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the largest position of the “upper crust” of funds followed by Insider Monkey, worth an estimated $2.4 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $1.7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Teradata Corporation (NYSE:TDC) but similarly valued. We will take a look at John Bean Technologies Corporation (NYSE:JBT), AdaptHealth Corp. (NASDAQ:AHCO), World Wrestling Entertainment, Inc. (NYSE:WWE), 51job, Inc. (NASDAQ:JOBS), UniFirst Corp (NYSE:UNF), PNM Resources, Inc. (NYSE:PNM), and Axis Capital Holdings Limited (NYSE:AXS). This group of stocks’ market valuations resemble TDC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JBT 21 157661 8
AHCO 17 306527 -6
WWE 25 256023 -4
JOBS 18 126535 2
UNF 17 53080 2
PNM 26 720736 -4
AXS 23 596246 2
Average 21 316687 0

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 $317 million. That figure was $481 million in TDC’s case. PNM Resources, Inc. (NYSE:PNM) is the most popular stock in this table. On the other hand AdaptHealth Corp. (NASDAQ:AHCO) is the least popular one with only 17 bullish hedge fund positions. Teradata Corporation (NYSE:TDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TDC is 78.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on TDC as the stock returned 28.2% since the end of Q1 (through 7/9) 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.