Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Comfort Systems USA, Inc. (NYSE:FIX) was in 28 hedge funds’ portfolios at the end of the first quarter of 2019. FIX investors should be aware of an increase in activity from the world’s largest hedge funds lately. There were 24 hedge funds in our database with FIX positions at the end of the previous quarter. Our calculations also showed that fix isn’t among the 30 most popular stocks among hedge funds.
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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to review the key hedge fund action encompassing Comfort Systems USA, Inc. (NYSE:FIX).
How have hedgies been trading Comfort Systems USA, Inc. (NYSE:FIX)?
Heading into the second quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the fourth quarter of 2018. On the other hand, there were a total of 17 hedge funds with a bullish position in FIX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Daruma Asset Management was the largest shareholder of Comfort Systems USA, Inc. (NYSE:FIX), with a stake worth $27.3 million reported as of the end of March. Trailing Daruma Asset Management was Renaissance Technologies, which amassed a stake valued at $21.5 million. Millennium Management, Royce & Associates, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, some big names were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Comfort Systems USA, Inc. (NYSE:FIX). Arrowstreet Capital had $7.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $1.4 million position during the quarter. The other funds with brand new FIX positions are Joel Greenblatt’s Gotham Asset Management, Minhua Zhang’s Weld Capital Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Comfort Systems USA, Inc. (NYSE:FIX) but similarly valued. These stocks are 8×8, Inc. (NYSE:EGHT), Fabrinet (NYSE:FN), Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), and Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). This group of stocks’ market valuations match FIX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EGHT | 20 | 318522 | 3 |
| FN | 20 | 118669 | 2 |
| MDGL | 19 | 419463 | 0 |
| PLAY | 21 | 196673 | -1 |
| Average | 20 | 263332 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $167 million in FIX’s case. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is the most popular stock in this table. On the other hand Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Comfort Systems USA, Inc. (NYSE:FIX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FIX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FIX were disappointed as the stock returned -7.8% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
