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 (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Exponent, Inc. (NASDAQ:EXPO).
Exponent, Inc. (NASDAQ:EXPO) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that EXPO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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.
Andrew Sandler of Sandler Capital Management
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 surrounding Exponent, Inc. (NASDAQ:EXPO).
How have hedgies been trading Exponent, Inc. (NASDAQ:EXPO)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the third quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in EXPO a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Exponent, Inc. (NASDAQ:EXPO), which was worth $37.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $13.6 million worth of shares. Sandler Capital Management, GLG Partners, and Winton Capital Management 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 Sandler Capital Management allocated the biggest weight to Exponent, Inc. (NASDAQ:EXPO), around 1.52% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to EXPO.
Because Exponent, Inc. (NASDAQ:EXPO) has experienced declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of the 750 funds monitored by Insider Monkey, worth about $2.1 million in stock. Brad Dunkley and Blair Levinsky’s fund, Waratah Capital Advisors, also cut its stock, about $1.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Exponent, Inc. (NASDAQ:EXPO) but similarly valued. These stocks are FireEye Inc (NASDAQ:FEYE), Switch, Inc. (NYSE:SWCH), John Bean Technologies Corporation (NYSE:JBT), and Physicians Realty Trust (NYSE:DOC). All of these stocks’ market caps match EXPO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FEYE | 30 | 267777 | 1 |
| SWCH | 18 | 303775 | 3 |
| JBT | 16 | 143502 | 1 |
| DOC | 11 | 94668 | -4 |
| Average | 18.75 | 202431 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $111 million in EXPO’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 11 bullish hedge fund positions. Exponent, Inc. (NASDAQ:EXPO) is not the least popular stock in this group but hedge fund interest is still below average. 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on EXPO as the stock returned -13.8% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
