Is Fabrinet (NYSE:FN) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the winners in the stock market.
Is Fabrinet (NYSE:FN) a buy here? Money managers are taking a bullish view. The number of bullish hedge fund positions improved by 3 recently. Our calculations also showed that fn isn’t among the 30 most popular stocks among hedge funds. FN was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 15 hedge funds in our database with FN positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s go over the fresh hedge fund action regarding Fabrinet (NYSE:FN).
Hedge fund activity in Fabrinet (NYSE:FN)
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in FN 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.
Among these funds, Royce & Associates held the most valuable stake in Fabrinet (NYSE:FN), which was worth $39.6 million at the end of the third quarter. On the second spot was Divisar Capital which amassed $22.5 million worth of shares. Moreover, Renaissance Technologies, Citadel Investment Group, and Ariel Investments were also bullish on Fabrinet (NYSE:FN), allocating a large percentage of their portfolios to this stock.
Now, specific money managers were breaking ground themselves. Divisar Capital, managed by Steven Baughman, created the most outsized position in Fabrinet (NYSE:FN). Divisar Capital had $22.5 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $1.8 million position during the quarter. The following funds were also among the new FN investors: Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Joel Greenblatt’s Gotham Asset Management, and Robert B. Gillam’s McKinley Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Fabrinet (NYSE:FN). We will take a look at Granite Construction Incorporated (NYSE:GVA), DiamondRock Hospitality Company (NYSE:DRH), Taylor Morrison Home Corp (NYSE:TMHC), and Medpace Holdings, Inc. (NASDAQ:MEDP). This group of stocks’ market values are closest to FN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GVA | 11 | 94135 | -5 |
| DRH | 19 | 167292 | 10 |
| TMHC | 15 | 219436 | -6 |
| MEDP | 23 | 170623 | -3 |
| Average | 17 | 162872 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $127 million in FN’s case. Medpace Holdings, Inc. (NASDAQ:MEDP) is the most popular stock in this table. On the other hand Granite Construction Incorporated (NYSE:GVA) is the least popular one with only 11 bullish hedge fund positions. Fabrinet (NYSE:FN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on FN, though not to the same extent, as the stock returned 17.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
