We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Fortive Corporation (NYSE:FTV) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Fortive Corporation (NYSE:FTV) a buy here? Money managers are turning bullish. The number of bullish hedge fund bets rose by 7 recently. Our calculations also showed that FTV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Andreas Halvorsen of Viking Global
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the new hedge fund action encompassing Fortive Corporation (NYSE:FTV).
Hedge fund activity in Fortive Corporation (NYSE:FTV)
At the end of the fourth quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FTV over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Fortive Corporation (NYSE:FTV) was held by Viking Global, which reported holding $547.2 million worth of stock at the end of September. It was followed by Millennium Management with a $103.9 million position. Other investors bullish on the company included D E Shaw, Gates Capital Management, and Select Equity Group. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Fortive Corporation (NYSE:FTV), around 3.56% of its 13F portfolio. Viking Global is also relatively very bullish on the stock, designating 2.56 percent of its 13F equity portfolio to FTV.
As industrywide interest jumped, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Fortive Corporation (NYSE:FTV). Balyasny Asset Management had $40.8 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $26.1 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Louis Bacon’s Moore Global Investments, and Steve Cohen’s Point72 Asset Management.
Let’s now review hedge fund activity in other stocks similar to Fortive Corporation (NYSE:FTV). These stocks are Stanley Black & Decker, Inc. (NYSE:SWK), Pioneer Natural Resources Company (NYSE:PXD), Microchip Technology Incorporated (NASDAQ:MCHP), and Digital Realty Trust, Inc. (NYSE:DLR). This group of stocks’ market caps match FTV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SWK | 41 | 1598834 | 13 |
| PXD | 53 | 1070714 | 3 |
| MCHP | 46 | 1428178 | 14 |
| DLR | 26 | 175397 | 7 |
| Average | 41.5 | 1068281 | 9.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $1068 million. That figure was $1260 million in FTV’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Digital Realty Trust, Inc. (NYSE:DLR) is the least popular one with only 26 bullish hedge fund positions. Fortive Corporation (NYSE:FTV) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately FTV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FTV were disappointed as the stock returned -22.1% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
