Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Fox Factory Holding Corp (NASDAQ:FOXF) was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. FOXF has seen a decrease in hedge fund sentiment of late. There were 14 hedge funds in our database with FOXF positions at the end of the previous quarter. Our calculations also showed that FOXF isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the key hedge fund action regarding Fox Factory Holding Corp (NASDAQ:FOXF).
Hedge fund activity in Fox Factory Holding Corp (NASDAQ:FOXF)
At Q2’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FOXF over the last 16 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Fox Factory Holding Corp (NASDAQ:FOXF) was held by Renaissance Technologies, which reported holding $7.4 million worth of stock at the end of March. It was followed by Driehaus Capital with a $6.4 million position. Other investors bullish on the company included Royce & Associates, Navellier & Associates, and Arrowstreet Capital.
Due to the fact that Fox Factory Holding Corp (NASDAQ:FOXF) has faced falling interest from the smart money, logic holds that there lies a certain “tier” of money managers that decided to sell off their entire stakes heading into Q3. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $1 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks similar to Fox Factory Holding Corp (NASDAQ:FOXF). We will take a look at Thor Industries, Inc. (NYSE:THO), AMC Networks Inc (NASDAQ:AMCX), Terreno Realty Corporation (NYSE:TRNO), and Sunstone Hotel Investors Inc (NYSE:SHO). All of these stocks’ market caps match FOXF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THO | 19 | 115885 | -1 |
| AMCX | 19 | 306968 | -1 |
| TRNO | 9 | 48390 | -4 |
| SHO | 21 | 220719 | 1 |
| Average | 17 | 172991 | -1.25 |
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 $173 million. That figure was $28 million in FOXF’s case. Sunstone Hotel Investors Inc (NYSE:SHO) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 9 bullish hedge fund positions. Fox Factory Holding Corp (NASDAQ:FOXF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FOXF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FOXF investors were disappointed as the stock returned -24.6% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
