Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to TechnipFMC plc (NYSE:FTI) changed recently.
TechnipFMC plc (NYSE:FTI) has experienced an increase in hedge fund sentiment lately. Our calculations also showed that FTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kerr Neilson of Platinum Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s go over the key hedge fund action surrounding TechnipFMC plc (NYSE:FTI).
Hedge fund activity in TechnipFMC plc (NYSE:FTI)
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FTI over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TechnipFMC plc (NYSE:FTI) was held by Platinum Asset Management, which reported holding $209.2 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $187.7 million position. Other investors bullish on the company included Millennium Management, Balyasny Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Platinum Asset Management allocated the biggest weight to TechnipFMC plc (NYSE:FTI), around 4.68% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 4.36 percent of its 13F equity portfolio to FTI.
As aggregate interest increased, specific money managers were breaking ground themselves. Encompass Capital Advisors, managed by Todd J. Kantor, established the most outsized position in TechnipFMC plc (NYSE:FTI). Encompass Capital Advisors had $25 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $21.1 million investment in the stock during the quarter. The following funds were also among the new FTI investors: Peter Muller’s PDT Partners, Sara Nainzadeh’s Centenus Global Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TechnipFMC plc (NYSE:FTI) but similarly valued. These stocks are SVB Financial Group (NASDAQ:SIVB), Aramark (NYSE:ARMK), Camden Property Trust (NYSE:CPT), and Noble Energy, Inc. (NYSE:NBL). All of these stocks’ market caps resemble FTI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIVB | 39 | 597276 | 13 |
| ARMK | 35 | 1297465 | -1 |
| CPT | 20 | 316246 | 1 |
| NBL | 28 | 602859 | 3 |
| Average | 30.5 | 703462 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $703 million. That figure was $768 million in FTI’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Camden Property Trust (NYSE:CPT) is the least popular one with only 20 bullish hedge fund positions. TechnipFMC plc (NYSE:FTI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately FTI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FTI were disappointed as the stock returned 10.9% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
