We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards SPX FLOW, Inc. (NASDAQ:FLOW).
SPX FLOW, Inc. (NASDAQ:FLOW) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. FLOW was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 12 hedge funds in our database with FLOW holdings at the end of the previous quarter. Our calculations also showed that FLOW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most stock holders, hedge funds are viewed as worthless, old investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the top tier of this club, approximately 850 funds. It is estimated that this group of investors orchestrate the lion’s share of all hedge funds’ total asset base, and by keeping track of their first-class stock picks, Insider Monkey has come up with various investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard Driehaus of Driehaus 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 this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the key hedge fund action surrounding SPX FLOW, Inc. (NASDAQ:FLOW).
How are hedge funds trading SPX FLOW, Inc. (NASDAQ:FLOW)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in FLOW a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impax Asset Management held the most valuable stake in SPX FLOW, Inc. (NASDAQ:FLOW), which was worth $94.8 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $52.4 million worth of shares. Arrowstreet Capital, D E Shaw, and Millennium Management 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 Impax Asset Management allocated the biggest weight to SPX FLOW, Inc. (NASDAQ:FLOW), around 1.06% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to FLOW.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in SPX FLOW, Inc. (NASDAQ:FLOW). Arrowstreet Capital had $12.7 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $9.8 million investment in the stock during the quarter. The following funds were also among the new FLOW investors: Ken Griffin’s Citadel Investment Group, David Harding’s Winton Capital Management, and Noam Gottesman’s GLG Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SPX FLOW, Inc. (NASDAQ:FLOW) but similarly valued. We will take a look at Baozun Inc (NASDAQ:BZUN), Corrections Corp Of America (NYSE:CXW), BGC Partners, Inc. (NASDAQ:BGCP), and Shenandoah Telecommunications Company (NASDAQ:SHEN). This group of stocks’ market valuations resemble FLOW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BZUN | 15 | 44965 | -2 |
| CXW | 25 | 199275 | 6 |
| BGCP | 27 | 292768 | 5 |
| SHEN | 10 | 81260 | -7 |
| Average | 19.25 | 154567 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $213 million in FLOW’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 10 bullish hedge fund positions. SPX FLOW, Inc. (NASDAQ:FLOW) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately FLOW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FLOW investors were disappointed as the stock returned -39.8% during the same time period and underperformed 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 most of these stocks already outperformed the market in 2020.
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.
