Were These Hedge Funds Right About Loading Up On TE Connectivity Ltd. (TEL)?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding TE Connectivity Ltd. (NYSE:TEL).

TE Connectivity Ltd. (NYSE:TEL) investors should pay attention to an increase in hedge fund sentiment of late. TE Connectivity Ltd. (NYSE:TEL) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. There were 33 hedge funds in our database with TEL holdings at the end of March. Our calculations also showed that TEL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are plenty of methods market participants have at their disposal to size up their stock investments. Two of the less known methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best money managers can outpace the S&P 500 by a significant margin (see the details here).

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Our analysis determined that presidential election polls were wrong heading into the 2020 election and we were able to make the most accurate predictions in the country after making adjustments for the biases in existing polls. For example we predicted comfortable Trump victories in Florida, North Carolina, Texas, Iowa, and Ohio. We also predicted a very narrow Biden victory of 0.4 points in Wisconsin when most pollsters were predicting 8 to 10 points Biden victories. We are waiting for the results of 5 more states, but our accuracy rate so far is 100% (see our predictions). You can subscribe to our free daily newsletter on our website to get email alerts whenever we publish an interesting article. With all of this in mind let’s go over the key hedge fund action surrounding TE Connectivity Ltd. (NYSE:TEL).

How are hedge funds trading TE Connectivity Ltd. (NYSE:TEL)?

At second quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TEL over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, Generation Investment Management held the most valuable stake in TE Connectivity Ltd. (NYSE:TEL), which was worth $680.6 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $324 million worth of shares. Citadel Investment Group, Rivulet Capital, and Third Point 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 LFL Advisers allocated the biggest weight to TE Connectivity Ltd. (NYSE:TEL), around 13.12% of its 13F portfolio. Rivulet Capital is also relatively very bullish on the stock, earmarking 7.78 percent of its 13F equity portfolio to TEL.

Consequently, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in TE Connectivity Ltd. (NYSE:TEL). Balyasny Asset Management had $30.2 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $9.4 million position during the quarter. The other funds with new positions in the stock are Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Gregg Moskowitz’s Interval Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TE Connectivity Ltd. (NYSE:TEL) but similarly valued. These stocks are American International Group Inc (NYSE:AIG), Cadence Design Systems Inc (NASDAQ:CDNS), The Kroger Co. (NYSE:KR), Microchip Technology Incorporated (NASDAQ:MCHP), Lloyds Banking Group PLC (NYSE:LYG), Franco-Nevada Corporation (NYSE:FNV), and Manulife Financial Corporation (NYSE:MFC). This group of stocks’ market values are similar to TEL’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $1133 million. That figure was $2000 million in TEL’s case. The Kroger Co. (NYSE:KR) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 7 bullish hedge fund positions. TE Connectivity Ltd. (NYSE:TEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TEL is 83.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on TEL as the stock returned 19.4% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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