We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Fortis Inc. (NYSE:FTS).
Is Fortis Inc. (NYSE:FTS) undervalued? The smart money is betting on the stock. The number of bullish hedge fund bets advanced by 1 recently. Our calculations also showed that FTS 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action surrounding Fortis Inc. (NYSE:FTS).
How have hedgies been trading Fortis Inc. (NYSE:FTS)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FTS over the last 17 quarters. 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, GQG Partners held the most valuable stake in Fortis Inc. (NYSE:FTS), which was worth $232.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $163.7 million worth of shares. GLG Partners, Arrowstreet Capital, and Citadel Investment Group 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 GQG Partners allocated the biggest weight to Fortis Inc. (NYSE:FTS), around 2.37% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to FTS.
As aggregate interest increased, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Fortis Inc. (NYSE:FTS). Arrowstreet Capital had $47.3 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $1.5 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Fortis Inc. (NYSE:FTS). These stocks are MSCI Inc (NYSE:MSCI), Hess Corporation (NYSE:HES), Copart, Inc. (NASDAQ:CPRT), and IAC/InterActiveCorp (NASDAQ:IAC). This group of stocks’ market caps match FTS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSCI | 37 | 643687 | 1 |
| HES | 36 | 921996 | 1 |
| CPRT | 36 | 580287 | 6 |
| IAC | 51 | 2111302 | 4 |
| Average | 40 | 1064318 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1064 million. That figure was $561 million in FTS’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Hess Corporation (NYSE:HES) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks Fortis Inc. (NYSE:FTS) is even less popular than HES. Hedge funds dodged a bullet by taking a bearish stance towards FTS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FTS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FTS investors were disappointed as the stock returned -6.6% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
