Hedge Funds Are Crazy About FARO Technologies, Inc. (FARO)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like FARO Technologies, Inc. (NASDAQ:FARO) .

Is FARO Technologies, Inc. (NASDAQ:FARO) a buy right now? Money managers are undoubtedly turning bullish. The number of long hedge fund positions that are disclosed in regulatory 13F filings advanced by 6 recently. There were 15 hedge funds in our database with FARO positions at the end of the third quarter. At the end of this article we will also compare FARO to other stocks including Cryolife Inc (NYSE:CRY), CBIZ, Inc. (NYSE:CBZ), and EZCORP Inc (NASDAQ:EZPW) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to take a gander at the key action surrounding FARO Technologies, Inc. (NASDAQ:FARO).

Hedge fund activity in FARO Technologies, Inc. (NASDAQ:FARO)

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, up 67% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in FARO at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in FARO Technologies, Inc. (NASDAQ:FARO), worth close to $27.9 million, accounting for 0.2% of its total 13F portfolio. Coming in second is Jim Simons’ Renaissance Technologies with an $8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Cliff Asness’ AQR Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Fisher’s Fisher Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. AQR Capital Management established the largest position in FARO Technologies, Inc. (NASDAQ:FARO). According to regulatory filings, the fund had $5.2 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.8 million investment in the stock during the quarter. The other funds with brand new FARO positions are Josh Goldberg’s G2 Investment Partners Management, Glenn Russell Dubin’s Highbridge Capital Management, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s go over hedge fund activity in other stocks similar to FARO Technologies, Inc. (NASDAQ:FARO). We will take a look at Cryolife Inc (NYSE:CRY), CBIZ, Inc. (NYSE:CBZ), EZCORP Inc (NASDAQ:EZPW), and Farmer Brothers Co. (NASDAQ:FARM). All of these stocks’ market caps are similar to FARO’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $51 million in FARO’s case. CBIZ, Inc. (NYSE:CBZ) is the most popular stock in this table. On the other hand Farmer Brothers Co. (NASDAQ:FARM) is the least popular one with only 12 bullish hedge fund positions. FARO Technologies, Inc. (NASDAQ:FARO) 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 CBZ might be a better candidate to consider taking a long position in.

Disclosure: None