Hedge Fund Dollars Flowing Into Flowserve Corporation (FLS)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Flowserve Corporation (NYSE:FLS) based on that data.

Flowserve Corporation (NYSE:FLS) has experienced an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that FLS 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. 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. With all of this in mind let’s take a gander at the latest hedge fund action regarding Flowserve Corporation (NYSE:FLS).

Hedge fund activity in Flowserve Corporation (NYSE:FLS)

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FLS over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, GAMCO Investors was the largest shareholder of Flowserve Corporation (NYSE:FLS), with a stake worth $46.9 million reported as of the end of September. Trailing GAMCO Investors was Adage Capital Management, which amassed a stake valued at $24.8 million. Impax Asset Management, Renaissance Technologies, and D E Shaw 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 GAMCO Investors allocated the biggest weight to Flowserve Corporation (NYSE:FLS), around 0.55% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to FLS.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Renaissance Technologies, assembled the biggest position in Flowserve Corporation (NYSE:FLS). Renaissance Technologies had $20.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $14.1 million investment in the stock during the quarter. The other funds with brand new FLS positions are Greg Eisner’s Engineers Gate Manager, Benjamin A. Smith’s Laurion Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Flowserve Corporation (NYSE:FLS). We will take a look at MorphoSys AG (NASDAQ:MOR), Echostar Corporation (NASDAQ:SATS), Manpowergroup Inc (NYSE:MAN), and Popular Inc (NASDAQ:BPOP). This group of stocks’ market valuations match FLS’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $181 million in FLS’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand MorphoSys AG (NASDAQ:MOR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Flowserve Corporation (NYSE:FLS) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately FLS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FLS were disappointed as the stock returned 9.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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