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. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Flex Ltd. (NASDAQ:FLEX) and determine whether the smart money was really smart about this stock.
Is Flex Ltd. (NASDAQ:FLEX) an exceptional investment today? The best stock pickers were betting on the stock. The number of bullish hedge fund bets moved up by 10 in recent months. Flex Ltd. (NASDAQ:FLEX) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FLEX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with FLEX positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Scott Ferguson of Sachem Head Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to view the recent hedge fund action regarding Flex Ltd. (NASDAQ:FLEX).
Hedge fund activity in Flex Ltd. (NASDAQ:FLEX)
At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 42% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in FLEX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Flex Ltd. (NASDAQ:FLEX), which was worth $180.1 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $169.9 million worth of shares. Iridian Asset Management, Sachem Head Capital, 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 Nishkama Capital allocated the biggest weight to Flex Ltd. (NASDAQ:FLEX), around 12.67% of its 13F portfolio. Sachem Head Capital is also relatively very bullish on the stock, setting aside 5.25 percent of its 13F equity portfolio to FLEX.
As aggregate interest increased, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Flex Ltd. (NASDAQ:FLEX). Point72 Asset Management had $32.4 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $19.8 million investment in the stock during the quarter. The other funds with brand new FLEX positions are Renaissance Technologies, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Flex Ltd. (NASDAQ:FLEX) but similarly valued. We will take a look at Apache Corporation (NASDAQ:APA), Hyatt Hotels Corporation (NYSE:H), Rexford Industrial Realty Inc (NYSE:REXR), ITT Inc. (NYSE:ITT), Brunswick Corporation (NYSE:BC), National Instruments Corporation (NASDAQ:NATI), and CDK Global Inc (NASDAQ:CDK). This group of stocks’ market caps resemble FLEX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APA | 40 | 590803 | 5 |
| H | 27 | 468490 | 3 |
| REXR | 24 | 179158 | 9 |
| ITT | 25 | 512144 | -3 |
| BC | 35 | 1425715 | 12 |
| NATI | 35 | 259007 | 6 |
| CDK | 32 | 323704 | 8 |
| Average | 31.1 | 537003 | 5.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $537 million. That figure was $942 million in FLEX’s case. Apache Corporation (NYSE:APA) is the most popular stock in this table. On the other hand Rexford Industrial Realty Inc (NYSE:REXR) is the least popular one with only 24 bullish hedge fund positions. Flex Ltd. (NASDAQ:FLEX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLEX is 71.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately FLEX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FLEX were disappointed as the stock returned 6% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
