Were These Hedge Funds Wrong About Piling Into Teledyne Technologies Incorporated (TDY)?

Keeping this in mind, let’s analyze whether Teledyne Technologies Incorporated (NYSE:TDY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Teledyne Technologies Incorporated (NYSE:TDY) shareholders have witnessed an increase in hedge fund interest recently. Teledyne Technologies Incorporated (NYSE:TDY) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TDY 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.

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 S&P 500 ETFs by more than 56 percentage points since March 2017 (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.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best high dividend stocks to buy to identify high dividend stocks with upside potential in this low interest rate environment. 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 website to get excerpts of these letters in your inbox. Now let’s take a look at the recent hedge fund action encompassing Teledyne Technologies Incorporated (NYSE:TDY).

What have hedge funds been doing with Teledyne Technologies Incorporated (NYSE:TDY)?

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 62% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in TDY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Teledyne Technologies Incorporated (NYSE:TDY), which was worth $68.8 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $59.4 million worth of shares. Millennium Management, East Side Capital (RR Partners), and Scopus Asset 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 East Side Capital (RR Partners) allocated the biggest weight to Teledyne Technologies Incorporated (NYSE:TDY), around 8.09% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, earmarking 2.6 percent of its 13F equity portfolio to TDY.

Consequently, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Teledyne Technologies Incorporated (NYSE:TDY). Balyasny Asset Management had $16.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $16.5 million investment in the stock during the quarter. The other funds with brand new TDY positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Donald Sussman’s Paloma Partners, and Greg Eisner’s Engineers Gate Manager.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Teledyne Technologies Incorporated (NYSE:TDY) but similarly valued. These stocks are Black Knight, Inc. (NYSE:BKI), Halliburton Company (NYSE:HAL), Equity Lifestyle Properties, Inc. (NYSE:ELS), Principal Financial Group Inc (NASDAQ:PFG), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Waters Corporation (NYSE:WAT), and Varian Medical Systems, Inc. (NYSE:VAR). This group of stocks’ market caps resemble TDY’s market cap.

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As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $620 million. That figure was $446 million in TDY’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Varian Medical Systems, Inc. (NYSE:VAR) is the least popular one with only 27 bullish hedge fund positions. Teledyne Technologies Incorporated (NYSE:TDY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TDY is 60.6. 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. 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 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 surpassed the market again by 20.1 percentage points. Unfortunately TDY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TDY investors were disappointed as the stock returned -0.6% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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