In this article we will check out the progression of hedge fund sentiment towards TE Connectivity Ltd. (NYSE:TEL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is TE Connectivity (TEL) stock a buy or sell? The best stock pickers were becoming hopeful. The number of bullish hedge fund bets improved by 6 recently. TE Connectivity Ltd. (NYSE:TEL) was in 39 hedge funds’ portfolios at the end of December. The all time high for this statistic is 44. Our calculations also showed that TEL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 33 hedge funds in our database with TEL holdings at the end of September.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 124 percentage points since March 2017 (see the details here).
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Do Hedge Funds Think TEL Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the third quarter of 2020. By comparison, 44 hedge funds held shares or bullish call options in TEL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of TE Connectivity Ltd. (NYSE:TEL), with a stake worth $801.7 million reported as of the end of December. Trailing Generation Investment Management was First Pacific Advisors LLC, which amassed a stake valued at $378.5 million. Impax Asset Management, Third Point, and Rivulet Capital 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 16.23% of its 13F portfolio. Rivulet Capital is also relatively very bullish on the stock, dishing out 6.41 percent of its 13F equity portfolio to TEL.
Consequently, specific money managers have jumped into TE Connectivity Ltd. (NYSE:TEL) headfirst. Suvretta Capital Management, managed by Aaron Cowen, initiated the most outsized position in TE Connectivity Ltd. (NYSE:TEL). Suvretta Capital Management had $52.4 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also initiated a $15.9 million position during the quarter. The other funds with new positions in the stock are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TE Connectivity Ltd. (NYSE:TEL) but similarly valued. We will take a look at KLA Corporation (NASDAQ:KLAC), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), L3Harris Technologies, Inc. (NYSE:LHX), Synopsys, Inc. (NASDAQ:SNPS), Amphenol Corporation (NYSE:APH), Digital Realty Trust, Inc. (NYSE:DLR), and Chipotle Mexican Grill, Inc. (NYSE:CMG). This group of stocks’ market valuations match TEL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $1207 million. That figure was $2165 million in TEL’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) is the least popular one with only 20 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 81.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on TEL as the stock returned 7.1% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.