Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Comfort Systems USA, Inc. (NYSE:FIX) .
Is Comfort Systems USA, Inc. (NYSE:FIX) a buy right now? The smart money is taking a bearish view. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings retreated by 1 in recent months. There were 21 hedge funds in our database with FIX positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cray Inc. (NASDAQ:CRAY), Sturm, Ruger & Company (NYSE:RGR), and Knowles Corp (NYSE:KN) to gather more data points.
Follow Comfort Systems Usa Inc (NYSE:FIX)
Follow Comfort Systems Usa Inc (NYSE:FIX)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading Comfort Systems USA, Inc. (NYSE:FIX)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 5% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in FIX at the beginning of this year. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Daruma Asset Management, led by Mariko Gordon, holds the biggest position in Comfort Systems USA, Inc. (NYSE:FIX). Daruma Asset Management has a $41.8 million position in the stock, comprising 2.6% of its 13F portfolio. On Daruma Asset Management’s heels is Renaissance Technologies, one of the largest hedge funds in the world,with a $21 million position. Remaining peers that are bullish comprise Chuck Royce’ Royce & Associates, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that Comfort Systems USA, Inc. (NYSE:FIX) has gone through declining sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Richard Driehaus’ Driehaus Capital got rid of the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $2.7 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $2.2 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar to Comfort Systems USA, Inc. (NYSE:FIX). These stocks are Cray Inc. (NASDAQ:CRAY), Sturm, Ruger & Company (NYSE:RGR), Knowles Corp (NYSE:KN), and Neenah Paper, Inc. (NYSE:NP). All of these stocks’ market caps match FIX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRAY | 13 | 29916 | -5 |
| RGR | 15 | 76647 | -1 |
| KN | 11 | 18331 | 1 |
| NP | 10 | 94224 | 3 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $135 million in FIX’s case. Sturm, Ruger & Company (NYSE:RGR) is the most popular stock in this table. On the other hand Neenah Paper, Inc. (NYSE:NP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Comfort Systems USA, Inc. (NYSE:FIX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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