Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of FormFactor, Inc. (NASDAQ:FORM).
Is FormFactor, Inc. (NASDAQ:FORM) a healthy stock for your portfolio? Money managers are becoming more confident. The number of long hedge fund bets improved by 3 recently. Our calculations also showed that FORM isn’t among the 30 most popular stocks among hedge funds (see the video below). FORM was in 14 hedge funds’ portfolios at the end of June. There were 11 hedge funds in our database with FORM holdings at the end of the previous quarter.
Video: Click the image to 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action regarding FormFactor, Inc. (NASDAQ:FORM).
How are hedge funds trading FormFactor, Inc. (NASDAQ:FORM)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in FORM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in FormFactor, Inc. (NASDAQ:FORM). Royce & Associates has a $20.8 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Crosslink Capital, led by Seymour Sy Kaufman and Michael Stark, holding a $6.4 million position; 1.5% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Ken Fisher’s Fisher Asset Management, Renaissance Technologies and Steve Cohen’s Point72 Asset Management.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the biggest position in FormFactor, Inc. (NASDAQ:FORM). Millennium Management had $1.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Roger Ibbotson’s Zebra Capital Management, Thomas Bailard’s Bailard Inc, and Hoon Kim’s Quantinno Capital.
Let’s now review hedge fund activity in other stocks similar to FormFactor, Inc. (NASDAQ:FORM). These stocks are Editas Medicine, Inc. (NASDAQ:EDIT), 1st Source Corporation (NASDAQ:SRCE), American Finance Trust, Inc. (NASDAQ:AFIN), and Lakeland Financial Corporation (NASDAQ:LKFN). This group of stocks’ market caps resemble FORM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EDIT | 14 | 114839 | -1 |
| SRCE | 6 | 28585 | -3 |
| AFIN | 4 | 7811 | -5 |
| LKFN | 11 | 19717 | 0 |
| Average | 8.75 | 42738 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $44 million in FORM’s case. Editas Medicine, Inc. (NASDAQ:EDIT) is the most popular stock in this table. On the other hand American Finance Trust, Inc. (NASDAQ:AFIN) is the least popular one with only 4 bullish hedge fund positions. FormFactor, Inc. (NASDAQ:FORM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on FORM as the stock returned 19% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
