As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about FormFactor, Inc. (NASDAQ:FORM).
FormFactor, Inc. (NASDAQ:FORM) investors should be aware of an increase in hedge fund sentiment of late. Our calculations also showed that FORM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Chuck Royce of Royce & Associates
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the new hedge fund action regarding FormFactor, Inc. (NASDAQ:FORM).
Hedge fund activity in FormFactor, Inc. (NASDAQ:FORM)
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in FORM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in FormFactor, Inc. (NASDAQ:FORM), worth close to $22 million, corresponding to 0.2% of its total 13F portfolio. The second most bullish fund manager is Steve Cohen of Point72 Asset Management, with a $13.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Renaissance Technologies, Seymour Sy Kaufman and Michael Stark’s Crosslink Capital and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Crosslink Capital allocated the biggest weight to FormFactor, Inc. (NASDAQ:FORM), around 1.33% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to FORM.
Consequently, specific money managers have jumped into FormFactor, Inc. (NASDAQ:FORM) headfirst. Driehaus Capital, managed by Richard Driehaus, created the largest position in FormFactor, Inc. (NASDAQ:FORM). Driehaus Capital had $4.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $2.6 million investment in the stock during the quarter. The other funds with brand new FORM positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as FormFactor, Inc. (NASDAQ:FORM) but similarly valued. These stocks are Rush Enterprises, Inc. (NASDAQ:RUSHA), GCP Applied Technologies Inc. (NYSE:GCP), Rent-A-Center Inc (NASDAQ:RCII), and TPG Specialty Lending Inc (NYSE:TSLX). This group of stocks’ market caps resemble FORM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RUSHA | 20 | 63597 | 0 |
| GCP | 21 | 341720 | -2 |
| RCII | 28 | 382437 | 10 |
| TSLX | 8 | 61787 | -2 |
| Average | 19.25 | 212385 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $69 million in FORM’s case. Rent-A-Center Inc (NASDAQ:RCII) is the most popular stock in this table. On the other hand TPG Specialty Lending Inc (NYSE:TSLX) is the least popular one with only 8 bullish hedge fund positions. FormFactor, Inc. (NASDAQ:FORM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on FORM as the stock returned 24.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
