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Should You Avoid IDEXX Laboratories, Inc. (IDXX)?

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is IDEXX Laboratories, Inc. (NASDAQ:IDXX) the right pick for your portfolio? The best stock pickers are in a bearish mood. The number of bullish hedge fund positions shrunk by 8 lately. Our calculations also showed that IDXX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action regarding IDEXX Laboratories, Inc. (NASDAQ:IDXX).

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

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter of 2019. By comparison, 35 hedge funds held shares or bullish call options in IDXX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

IDXX_dec2019

More specifically, Renaissance Technologies was the largest shareholder of IDEXX Laboratories, Inc. (NASDAQ:IDXX), with a stake worth $170.5 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $104.8 million. Chilton Investment Company, Rock Springs Capital Management, and Adage Capital Management 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 Chilton Investment Company allocated the biggest weight to IDEXX Laboratories, Inc. (NASDAQ:IDXX), around 2.19% of its portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 1.3 percent of its 13F equity portfolio to IDXX.

Seeing as IDEXX Laboratories, Inc. (NASDAQ:IDXX) has witnessed a decline in interest from the smart money, we can see that there were a few fund managers that decided to sell off their entire stakes heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $11.6 million in stock. Bruce Kovner’s fund, Caxton Associates, also dumped its stock, about $9.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to IDEXX Laboratories, Inc. (NASDAQ:IDXX). These stocks are Hormel Foods Corporation (NYSE:HRL), Entergy Corporation (NYSE:ETR), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Parker-Hannifin Corporation (NYSE:PH). All of these stocks’ market caps resemble IDXX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRL 19 190410 3
ETR 25 1677907 -5
CMG 38 4057541 1
PH 25 803965 -1
Average 26.75 1682456 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1682 million. That figure was $509 million in IDXX’s case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 19 bullish hedge fund positions. IDEXX Laboratories, Inc. (NASDAQ:IDXX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IDXX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IDXX were disappointed as the stock returned -7.5% during the fourth quarter (through the end of November) 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.

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

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