At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Bio-Techne Corporation (NASDAQ:TECH) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Bio-Techne Corporation (NASDAQ:TECH) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistics is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TECH investors should be aware of an increase in hedge fund sentiment recently. There were 26 hedge funds in our database with TECH holdings at the end of March. Our calculations also showed that TECH 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.
At the moment there are many methods shareholders use to appraise publicly traded companies. A couple of the most innovative methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the S&P 500 by a significant margin (see the details here).
James Dondero Highland Capital Management
James Dondero of Highland Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. Keeping this in mind let's take a peek at the fresh hedge fund action surrounding Bio-Techne Corporation (NASDAQ:TECH).
How have hedgies been trading Bio-Techne Corporation (NASDAQ:TECH)?
At second quarter's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in TECH a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Bio-Techne Corporation (NASDAQ:TECH), which was worth $103 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $55.6 million worth of shares. Alyeska Investment Group, AQR Capital Management, and Sandler Capital 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 Sandler Capital Management allocated the biggest weight to Bio-Techne Corporation (NASDAQ:TECH), around 1.57% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.61 percent of its 13F equity portfolio to TECH.
As aggregate interest increased, some big names were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Bio-Techne Corporation (NASDAQ:TECH). Arrowstreet Capital had $11 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $3.7 million investment in the stock during the quarter. The other funds with brand new TECH positions are James Dondero's Highland Capital Management, Jerome Pfund and Michael Sjostrom's Sectoral Asset Management, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Let's check out hedge fund activity in other stocks similar to Bio-Techne Corporation (NASDAQ:TECH). We will take a look at United Airlines Holdings Inc (NASDAQ:UAL), Erie Indemnity Company (NASDAQ:ERIE), Medical Properties Trust, Inc. (NYSE:MPW), Advance Auto Parts, Inc. (NYSE:AAP), NetApp Inc. (NASDAQ:NTAP), Darden Restaurants, Inc. (NYSE:DRI), and HubSpot Inc (NYSE:HUBS). This group of stocks' market caps are closest to TECH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UAL,38,917094,-3 ERIE,14,42805,-3 MPW,17,162185,1 AAP,47,1507053,9 NTAP,25,465896,-1 DRI,49,1202504,-3 HUBS,41,867564,14 Average,33,737872,2 [/table]
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $738 million. That figure was $279 million in TECH's case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 14 bullish hedge fund positions. Bio-Techne Corporation (NASDAQ:TECH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TECH is 54.6. 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately TECH wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TECH investors were disappointed as the stock returned -8.3% since Q2 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.
