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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Flex Ltd. (NASDAQ:FLEX).
Flex Ltd. (NASDAQ:FLEX) investors should be aware of a decrease in support from the world’s most elite money managers of late. FLEX was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 34 hedge funds in our database with FLEX holdings at the end of the previous quarter. Our calculations also showed that FLEX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a lot of metrics investors put to use to evaluate their stock investments. Some of the most useful metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best fund managers can beat the S&P 500 by a significant amount (see the details here).
Scott Ferguson of Sachem Head Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the recent hedge fund action regarding Flex Ltd. (NASDAQ:FLEX).
How are hedge funds trading Flex Ltd. (NASDAQ:FLEX)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the fourth quarter of 2019. On the other hand, there were a total of 27 hedge funds with a bullish position in FLEX a year ago. So, let’s examine 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, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the largest position in Flex Ltd. (NASDAQ:FLEX). Iridian Asset Management has a $158.8 million position in the stock, comprising 3.8% of its 13F portfolio. On Iridian Asset Management’s heels is Lyrical Asset Management, managed by Andrew Wellington and Jeff Keswin, which holds a $139.7 million position; 3.4% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism contain Richard S. Pzena’s Pzena Investment Management, Larry Robbins’s Glenview Capital and Scott Ferguson’s Sachem Head Capital. In terms of the portfolio weights assigned to each position Shannon River Fund Management allocated the biggest weight to Flex Ltd. (NASDAQ:FLEX), around 6.33% of its 13F portfolio. Sachem Head Capital is also relatively very bullish on the stock, earmarking 5.86 percent of its 13F equity portfolio to FLEX.
Seeing as Flex Ltd. (NASDAQ:FLEX) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds that decided to sell off their full holdings heading into Q4. At the top of the heap, Renaissance Technologies sold off the largest stake of all the hedgies tracked by Insider Monkey, valued at close to $19.8 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also cut its stock, about $16.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Flex Ltd. (NASDAQ:FLEX). These stocks are First Industrial Realty Trust, Inc. (NYSE:FR), Planet Fitness Inc (NYSE:PLNT), Axon Enterprise, Inc. (NASDAQ:AAXN), and Owens Corning (NYSE:OC). This group of stocks’ market valuations are similar to FLEX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FR | 24 | 215043 | 5 |
| PLNT | 44 | 804544 | 10 |
| AAXN | 26 | 413473 | 1 |
| OC | 30 | 398573 | -17 |
| Average | 31 | 457908 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $801 million in FLEX’s case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand First Industrial Realty Trust, Inc. (NYSE:FR) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Flex Ltd. (NASDAQ:FLEX) is even less popular than FR. Hedge funds clearly dropped the ball on FLEX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on FLEX as the stock returned 32.1% so far in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
