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. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards ForeScout Technologies, Inc. (NASDAQ:FSCT).
ForeScout Technologies, Inc. (NASDAQ:FSCT) investors should be aware of an increase in hedge fund interest of late. FSCT was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 19 hedge funds in our database with FSCT holdings at the end of the previous quarter. Our calculations also showed that FSCT 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).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Keith Meister of Corvex Capital
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s take a look at the key hedge fund action encompassing ForeScout Technologies, Inc. (NASDAQ:FSCT).
What does smart money think about ForeScout Technologies, Inc. (NASDAQ:FSCT)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the third quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in FSCT 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.
More specifically, Jericho Capital Asset Management was the largest shareholder of ForeScout Technologies, Inc. (NASDAQ:FSCT), with a stake worth $109.7 million reported as of the end of September. Trailing Jericho Capital Asset Management was Corvex Capital, which amassed a stake valued at $109.7 million. Sachem Head Capital, Altai Capital, and Point72 Asset 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 Altai Capital allocated the biggest weight to ForeScout Technologies, Inc. (NASDAQ:FSCT), around 39.87% of its 13F portfolio. North Run Capital is also relatively very bullish on the stock, designating 8.12 percent of its 13F equity portfolio to FSCT.
Now, some big names have been driving this bullishness. Sachem Head Capital, managed by Scott Ferguson, initiated the biggest position in ForeScout Technologies, Inc. (NASDAQ:FSCT). Sachem Head Capital had $50.8 million invested in the company at the end of the quarter. Kenneth Squire’s 13D Management also initiated a $16.3 million position during the quarter. The other funds with brand new FSCT positions are Dmitry Balyasny’s Balyasny Asset Management, Donald Sussman’s Paloma Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ForeScout Technologies, Inc. (NASDAQ:FSCT) but similarly valued. We will take a look at Kronos Worldwide, Inc. (NYSE:KRO), SciPlay Corporation (NASDAQ:SCPL), NextCure, Inc. (NASDAQ:NXTC), and Office Properties Income Trust (NASDAQ:OPI). This group of stocks’ market valuations are closest to FSCT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KRO | 13 | 72839 | 4 |
| SCPL | 15 | 101164 | -2 |
| NXTC | 17 | 410458 | 9 |
| OPI | 9 | 15847 | -1 |
| Average | 13.5 | 150077 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $419 million in FSCT’s case. NextCure, Inc. (NASDAQ:NXTC) is the most popular stock in this table. On the other hand Office Properties Income Trust (NASDAQ:OPI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks ForeScout Technologies, Inc. (NASDAQ:FSCT) is more popular among hedge funds. 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 13.0% in 2020 through April 6th but still managed to beat the market by 4.2 percentage points. Hedge funds were also right about betting on FSCT as the stock returned -3.1% so far in 2020 (through April 6th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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.
