Teledyne Technologies Incorporated (TDY) vs. Hedge Fund Favorites in 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Teledyne Technologies Incorporated (NYSE:TDY) a superb stock to buy now? Money managers are in a bullish mood. The number of long hedge fund bets moved up by 3 lately. Our calculations also showed that TDY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.


Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let’s analyze the fresh hedge fund action surrounding Teledyne Technologies Incorporated (NYSE:TDY).

How are hedge funds trading Teledyne Technologies Incorporated (NYSE:TDY)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TDY over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Teledyne Technologies Incorporated (NYSE:TDY) was held by AQR Capital Management, which reported holding $208.9 million worth of stock at the end of September. It was followed by Cardinal Capital with a $111.9 million position. Other investors bullish on the company included Fisher Asset Management, Scopus Asset Management, and RR Partners. In terms of the portfolio weights assigned to each position RR Partners allocated the biggest weight to Teledyne Technologies Incorporated (NYSE:TDY), around 5.59% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, setting aside 3.7 percent of its 13F equity portfolio to TDY.

As aggregate interest increased, specific money managers have been driving this bullishness. G2 Investment Partners Management, managed by Josh Goldberg, established the largest position in Teledyne Technologies Incorporated (NYSE:TDY). G2 Investment Partners Management had $9.4 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $4.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..

Let’s also examine hedge fund activity in other stocks similar to Teledyne Technologies Incorporated (NYSE:TDY). We will take a look at EXACT Sciences Corporation (NASDAQ:EXAS), Wynn Resorts, Limited (NASDAQ:WYNN), Regency Centers Corporation (NASDAQ:REG), and Cenovus Energy Inc (NYSE:CVE). This group of stocks’ market valuations match TDY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXAS 35 586487 3
WYNN 36 1171401 -3
REG 16 233615 4
CVE 25 635156 8
Average 28 656665 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $686 million in TDY’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Regency Centers Corporation (NASDAQ:REG) is the least popular one with only 16 bullish hedge fund positions. Teledyne Technologies Incorporated (NYSE:TDY) is not the most popular stock in this group but hedge fund interest is still above average. 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 10.1 percentage points. Hedge funds were also right about betting on TDY as the stock returned 67.4% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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