Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Fortive Corporation (NYSE:FTV) investors should pay attention to an increase in support from the world’s most elite money managers lately. FTV was in 34 hedge funds’ portfolios at the end of September. There were 28 hedge funds in our database with FTV positions at the end of the previous quarter. Our calculations also showed that FTV 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).
According to most investors, hedge funds are assumed to be worthless, old investment tools of years past. While there are over 8000 funds in operation at the moment, We choose to focus on the aristocrats of this club, approximately 750 funds. It is estimated that this group of investors oversee the lion’s share of the hedge fund industry’s total capital, and by keeping track of their inimitable equity investments, Insider Monkey has formulated several investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Andreas Halvorsen of Viking Global
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. With all of this in mind let’s analyze the key hedge fund action surrounding Fortive Corporation (NYSE:FTV).
What have hedge funds been doing with Fortive Corporation (NYSE:FTV)?
At Q3’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FTV over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Viking Global held the most valuable stake in Fortive Corporation (NYSE:FTV), which was worth $331.9 million at the end of the third quarter. On the second spot was Gates Capital Management which amassed $86.4 million worth of shares. D E Shaw, Select Equity Group, and Citadel Investment Group 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 Gates Capital Management allocated the biggest weight to Fortive Corporation (NYSE:FTV), around 3.75% of its 13F portfolio. Viking Global is also relatively very bullish on the stock, dishing out 1.73 percent of its 13F equity portfolio to FTV.
Now, key money managers have jumped into Fortive Corporation (NYSE:FTV) headfirst. Viking Global, managed by Andreas Halvorsen, established the most outsized position in Fortive Corporation (NYSE:FTV). Viking Global had $331.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $25.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, David E. Shaw’s D E Shaw, and Clint Carlson’s Carlson Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fortive Corporation (NYSE:FTV) but similarly valued. We will take a look at Archer Daniels Midland Company (NYSE:ADM), PPL Corporation (NYSE:PPL), United Continental Holdings Inc (NYSE:UAL), and Royal Caribbean Cruises Ltd. (NYSE:RCL). This group of stocks’ market valuations match FTV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADM | 21 | 511939 | -5 |
| PPL | 24 | 516405 | 4 |
| UAL | 46 | 7090686 | -1 |
| RCL | 45 | 1672773 | -1 |
| Average | 34 | 2447951 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $2448 million. That figure was $803 million in FTV’s case. United Continental Holdings Inc (NYSE:UAL) is the most popular stock in this table. On the other hand Archer Daniels Midland Company (NYSE:ADM) is the least popular one with only 21 bullish hedge fund positions. Fortive Corporation (NYSE:FTV) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 FTV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FTV investors were disappointed as the stock returned 14% in 2019 (as of 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
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.
