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Were Hedge Funds Right About Cutting Tech Data Corporation (TECD)?

We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article, we look at what those funds think of Tech Data Corporation (NASDAQ:TECD) based on that data.

Is Tech Data Corporation (NASDAQ:TECD) the right investment to pursue these days? Hedge funds are in a bearish mood. The number of bullish hedge fund positions were cut by 1 recently. Our calculations also showed that TECD isn’t among the 30 most popular stocks among hedge funds (view the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the latest hedge fund action regarding Tech Data Corporation (NASDAQ:TECD).

How are hedge funds trading Tech Data Corporation (NASDAQ:TECD)?

Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TECD over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with TECD Positions

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Tech Data Corporation (NASDAQ:TECD). AQR Capital Management has a $195.5 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is GLG Partners, led by Noam Gottesman, holding a $24.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Daniel Beltzman and Gergory Smith’s Birch Run Capital and Joel Greenblatt’s Gotham Asset Management.

Because Tech Data Corporation (NASDAQ:TECD) has witnessed bearish sentiment from the smart money, we can see that there exists a select few fund managers who were dropping their entire stakes last quarter. Interestingly, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital cut the biggest investment of all the hedgies monitored by Insider Monkey, worth about $8.6 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund said goodbye to about $6.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Tech Data Corporation (NASDAQ:TECD). We will take a look at Univar Solutions Inc. (NYSE:UNVR), Outfront Media Inc (NYSE:OUT), Pebblebrook Hotel Trust (NYSE:PEB), and Umpqua Holdings Corporation (NASDAQ:UMPQ). This group of stocks’ market valuations are closest to TECD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNVR 31 1301531 -11
OUT 22 343646 -3
PEB 13 98272 3
UMPQ 20 212334 0
Average 21.5 488946 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $489 million. That figure was $282 million in TECD’s case. Univar Solutions Inc. (NYSE:UNVR) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 13 bullish hedge fund positions. Tech Data Corporation (NASDAQ:TECD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TECD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TECD investors were disappointed as the stock returned -0.3% during the third quarter 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 in 2019.

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

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