Hedge Fund Sentiment Is Stagnant On Flextronics International Ltd. (FLEX)

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Flextronics International Ltd. (NASDAQ:FLEX) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 29 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Xylem Inc (NYSE:XYL), SVB Financial Group (NASDAQ:SIVB), and Macquarie Infrastructure Company LLC (NYSE:MIC) to gather more data points.

In the eyes of most stock holders, hedge funds are perceived as slow, old investment tools of years past. While there are over 8000 funds trading today, Our researchers look at the top tier of this club, around 700 funds. These investment experts orchestrate most of all hedge funds’ total capital, and by following their best investments, Insider Monkey has figured out a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s go over the key action surrounding Flextronics International Ltd. (NASDAQ:FLEX).

Hedge fund activity in Flextronics International Ltd. (NASDAQ:FLEX)

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Larry Robbins’ Glenview Capital has the number one position in Flextronics International Ltd. (NASDAQ:FLEX), worth close to $791.9 million, accounting for 3.9% of its total 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $126.2 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Thomas E. Claugus’ GMT Capital, Richard S. Pzena’s Pzena Investment Management and Gilchrist Berg’s Water Street Capital.

Seeing as Flextronics International Ltd. (NASDAQ:FLEX) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers who sold off their positions entirely by the end of the third quarter. Interestingly, Charles Jobson’s Delta Partners cut the biggest stake of the 700 funds tracked by Insider Monkey, totaling close to $20.7 million in call options, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $5.7 million worth of stock. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Flextronics International Ltd. (NASDAQ:FLEX) but similarly valued. These stocks are Xylem Inc (NYSE:XYL), SVB Financial Group (NASDAQ:SIVB), Macquarie Infrastructure Company LLC (NYSE:MIC), and Domino’s Pizza, Inc. (NYSE:DPZ). All of these stocks’ market caps are closest to FLEX’s market cap.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $862 million. That figure was $1.27 billion in FLEX’s case. Macquarie Infrastructure Company LLC (NYSE:MIC) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 23 bullish hedge fund positions. Flextronics International Ltd. (NASDAQ:FLEX) 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. In this regard MIC might be a better candidate to consider a long position.