How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Keysight Technologies Inc (NYSE:KEYS).
Is Keysight Technologies Inc (NYSE:KEYS) worth your attention right now? Money managers are in a bullish mood. The number of bullish hedge fund positions went up by 2 lately. Our calculations also showed that KEYS isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. We’re going to take a gander at the fresh hedge fund action surrounding Keysight Technologies Inc (NYSE:KEYS).
How are hedge funds trading Keysight Technologies Inc (NYSE:KEYS)?
At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in KEYS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Keysight Technologies Inc (NYSE:KEYS) was held by AQR Capital Management, which reported holding $216.6 million worth of stock at the end of March. It was followed by Ariel Investments with a $127.6 million position. Other investors bullish on the company included Renaissance Technologies, Sirios Capital Management, and Columbus Circle Investors.
As aggregate interest increased, some big names have been driving this bullishness. Sirios Capital Management, managed by John Brennan, assembled the largest position in Keysight Technologies Inc (NYSE:KEYS). Sirios Capital Management had $64.2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $15.1 million position during the quarter. The other funds with brand new KEYS positions are Leon Shaulov’s Maplelane Capital, Paul Tudor Jones’s Tudor Investment Corp, and Steve Cohen’s Point72 Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Keysight Technologies Inc (NYSE:KEYS) but similarly valued. We will take a look at Alexandria Real Estate Equities Inc (NYSE:ARE), Yum China Holdings, Inc. (NYSE:YUMC), Loews Corporation (NYSE:L), and Nucor Corporation (NYSE:NUE). This group of stocks’ market values resemble KEYS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARE | 27 | 484902 | 10 |
| YUMC | 28 | 448229 | -2 |
| L | 21 | 258588 | 1 |
| NUE | 22 | 237610 | -4 |
| Average | 24.5 | 357332 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $855 million in KEYS’s case. Yum China Holdings, Inc. (NYSE:YUMC) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Keysight Technologies Inc (NYSE:KEYS) is more popular among hedge funds. 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 KEYS as the stock returned 8.3% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
