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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Franklin Electric Co. (NASDAQ:FELE).
Is Franklin Electric Co. (NASDAQ:FELE) a worthy investment now? Hedge funds are taking a bullish view. The number of bullish hedge fund bets increased by 2 in recent months. Our calculations also showed that FELE 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).
If you’d ask most shareholders, hedge funds are perceived as slow, outdated financial vehicles of the past. While there are over 8000 funds trading at the moment, Our experts look at the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people control most of all hedge funds’ total asset base, and by keeping track of their unrivaled picks, Insider Monkey has spotted several investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Joel Greenblatt of Gotham Asset Management
Keeping this in mind let’s go over the fresh hedge fund action encompassing Franklin Electric Co. (NASDAQ:FELE).
How have hedgies been trading Franklin Electric Co. (NASDAQ:FELE)?
Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FELE over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Impax Asset Management, managed by Ian Simm, holds the number one position in Franklin Electric Co. (NASDAQ:FELE). Impax Asset Management has a $173.6 million position in the stock, comprising 1.9% of its 13F portfolio. On Impax Asset Management’s heels is Royce & Associates, led by Chuck Royce, holding a $50.3 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Mario Gabelli’s GAMCO Investors, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Franklin Electric Co. (NASDAQ:FELE), around 1.94% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.81 percent of its 13F equity portfolio to FELE.
As industrywide interest jumped, key hedge funds have jumped into Franklin Electric Co. (NASDAQ:FELE) headfirst. Paloma Partners, managed by Donald Sussman, established the largest position in Franklin Electric Co. (NASDAQ:FELE). Paloma Partners had $4.2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $1.8 million investment in the stock during the quarter. The other funds with brand new FELE positions are Minhua Zhang’s Weld Capital Management, Schonfeld Strategic Advisors, and Joel Greenblatt’s Gotham Asset Management.
Let’s check out hedge fund activity in other stocks similar to Franklin Electric Co. (NASDAQ:FELE). These stocks are PROS Holdings, Inc. (NYSE:PRO), Advanced Drainage Systems, Inc. (NYSE:WMS), Fluor Corporation (NYSE:FLR), and Commercial Metals Company (NYSE:CMC). This group of stocks’ market values resemble FELE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRO | 20 | 272799 | -7 |
| WMS | 25 | 486613 | -2 |
| FLR | 24 | 274625 | 4 |
| CMC | 27 | 265495 | 7 |
| Average | 24 | 324883 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $266 million in FELE’s case. Commercial Metals Company (NYSE:CMC) is the most popular stock in this table. On the other hand PROS Holdings, Inc. (NYSE:PRO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Franklin Electric Co. (NASDAQ:FELE) is even less popular than PRO. Hedge funds dodged a bullet by taking a bearish stance towards FELE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately FELE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FELE investors were disappointed as the stock returned -27.5% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
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.
