Should You Consider Investing in Teledyne Tech (TDY)?

Upslope Capital Management, an investment management firm, released its second-quarter 2024 investor letter. The firm had a promising start in Q2 but ended with difficulties. A copy of the letter can be downloaded here. There was macro and geopolitical uncertainty, and markets were expensive. These have usually been in favor of Upslope's strategy. The fund returned -2.6% (net) in Q2 compared to -3.5 % and +1.7% for the S&P Midcap 400 ETF (MDY) and HFRX Equity Hedge Index, respectively. YTD, the fund’s return was +2.8% (net) compared to +6.1% and +5.1% returns, respectively, for the indexes. In addition, you can check the fund's top 5 holdings to determine its best picks for 2024.

Upslope Capital Management highlighted stocks like Teledyne Technologies Incorporated (NYSE:TDY), in the second quarter 2024 investor letter. Teledyne Technologies Incorporated (NYSE:TDY) offers enabling technologies for industrial growth markets. The one-month return of Teledyne Technologies Incorporated (NYSE:TDY) was 4.02%, and its shares lost 1.44% of their value over the last 52 weeks. On July 17, 2024, Teledyne Technologies Incorporated (NYSE:TDY) stock closed at $402.06 per share with a market capitalization of $19.067 billion.

Upslope Capital Management stated the following regarding Teledyne Technologies Incorporated (NYSE:TDY) in its Q2 2024 investor letter:

"Teledyne Technologies Incorporated (NYSE:TDY) is a leading producer of specialty electronics, components, and technologies – primarily focused on imaging sensors and cameras. Segments include Digital Imaging (55% of FY 2024 sales), Instrumentation (24%), Aerospace & Defense Electronics (14%), and Engineered Systems (7%). End markets largely include industrial automation and aerospace/defense. 25% of sales are to U.S. government entities and half are to customers outside the U.S. The company was historically known as a reliable “compounder” – with a strong track record of disciplined acquisitions and an intense focus on growing free cash flow per share. However, in 2021 Teledyne stumbled following its transformative acquisition of FLIR (which Upslope previously owned). Shares have lagged indices and peers sharply ever since – and have de-rated significantly (now trading for a ~6% 2025 FCFE yield).

While the FLIR acquisition was ill-timed, challenges seemed to mostly stem from exogenous factors (ramping inflation + supply chain woes), as opposed to poor strategic and/or financial merit. Yes, FLIR makes the company a bit more “cyclical”/less predictable. But that’s okay if the reward is a strengthened competitive position, as appears to be the case. Regardless, expectations for the stock have clearly been reset. And importantly, a refreshed Teledyne – with FLIR fully integrated, a soon under-levered balance sheet, and a solid new CEO transitioning in – seems uniquely positioned to benefit from tailwinds in reshoring, automation, and rising defense spending."

A technician in a lab coat calibrating advanced electronic components.

Teledyne Technologies Incorporated (NYSE:TDY) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held Teledyne Technologies Incorporated (NYSE:TDY) at the end of the first quarter which was 40 in the previous quarter. While we acknowledge the potential of Teledyne Technologies Incorporated (NYSE:TDY) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we discussed Teledyne Technologies Incorporated (NYSE:TDY) and shared Aristotle Value Equity Strategy's views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

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