Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Flex Ltd. (NASDAQ:FLEX).
Is Flex Ltd. (NASDAQ:FLEX) worth your attention right now? Money managers were turning less bullish. The number of long hedge fund positions went down by 8 in recent months. Flex Ltd. (NASDAQ:FLEX) was in 35 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 48. Our calculations also showed that FLEX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a peek at the recent hedge fund action encompassing Flex Ltd. (NASDAQ:FLEX).
Do Hedge Funds Think FLEX Is A Good Stock To Buy Now?
At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards FLEX over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management has the biggest position in Flex Ltd. (NASDAQ:FLEX), worth close to $256.6 million, accounting for 3.3% of its total 13F portfolio. The second largest stake is held by Sachem Head Capital, managed by Scott Ferguson, which holds a $200.8 million position; the fund has 5% of its 13F portfolio invested in the stock. Other peers that hold long positions contain David Cohen and Harold Levy’s Iridian Asset Management, Richard S. Pzena’s Pzena Investment Management and Spencer M. Waxman’s Shannon River Fund Management. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Flex Ltd. (NASDAQ:FLEX), around 12.39% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, earmarking 6.54 percent of its 13F equity portfolio to FLEX.
Because Flex Ltd. (NASDAQ:FLEX) has faced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few money managers that elected to cut their full holdings heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, totaling about $44.7 million in stock. Renaissance Technologies, also cut its stock, about $34.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Flex Ltd. (NASDAQ:FLEX). These stocks are Ovintiv Inc. (NYSE:OVV), The Gap Inc. (NYSE:GPS), CRISPR Therapeutics AG (NASDAQ:CRSP), Jabil Inc. (NYSE:JBL), Vertiv Holdings Co (NYSE:VRT), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), and Hyatt Hotels Corporation (NYSE:H). This group of stocks’ market values resemble FLEX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OVV | 44 | 684078 | 4 |
| GPS | 28 | 370571 | -15 |
| CRSP | 43 | 1215665 | 9 |
| JBL | 27 | 517374 | 1 |
| VRT | 36 | 811401 | 0 |
| KNX | 21 | 261747 | -5 |
| H | 37 | 1003042 | 14 |
| Average | 33.7 | 694840 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.7 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $1149 million in FLEX’s case. Ovintiv Inc. (NYSE:OVV) is the most popular stock in this table. On the other hand Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is the least popular one with only 21 bullish hedge fund positions. Flex Ltd. (NASDAQ:FLEX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLEX is 49.3. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately FLEX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FLEX were disappointed as the stock returned -3.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Flex Ltd. (NASDAQ:FLEX)
Follow Flex Ltd. (NASDAQ:FLEX)
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Disclosure: None. This article was originally published at Insider Monkey.
