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.
Is Hollysys Automation Technologies Ltd (NASDAQ:HOLI) the right pick for your portfolio? Prominent investors are taking a bearish view. The number of long hedge fund positions decreased by 1 in recent months. Our calculations also showed that HOLI isn’t among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We’re going to take a gander at the recent hedge fund action regarding Hollysys Automation Technologies Ltd (NASDAQ:HOLI).
How have hedgies been trading Hollysys Automation Technologies Ltd (NASDAQ:HOLI)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HOLI over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the biggest position in Hollysys Automation Technologies Ltd (NASDAQ:HOLI). Impax Asset Management has a $54.3 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $7.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Because Hollysys Automation Technologies Ltd (NASDAQ:HOLI) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds that slashed their full holdings by the end of the third quarter. Interestingly, Noam Gottesman’s GLG Partners dropped the largest stake of the 700 funds followed by Insider Monkey, worth about $1.5 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund cut about $0.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hollysys Automation Technologies Ltd (NASDAQ:HOLI) but similarly valued. These stocks are Autolus Therapeutics plc (NASDAQ:AUTL), Criteo SA (NASDAQ:CRTO), Tortoise Energy Infrastructure Corporation (NYSE:TYG), and City Holding Company (NASDAQ:CHCO). This group of stocks’ market values are closest to HOLI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AUTL | 6 | 432143 | 0 |
| CRTO | 9 | 148982 | -3 |
| TYG | 2 | 1574 | -1 |
| CHCO | 8 | 19696 | -2 |
| Average | 6.25 | 150599 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $81 million in HOLI’s case. Criteo SA (NASDAQ:CRTO) is the most popular stock in this table. On the other hand Tortoise Energy Infrastructure Corporation (NYSE:TYG) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Hollysys Automation Technologies Ltd (NASDAQ:HOLI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HOLI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HOLI were disappointed as the stock returned -11.8% 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.
