Is FTI A Good Stock To Buy According To Hedge Funds?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to TechnipFMC plc (NYSE:FTI) changed recently.

Is FTI a good stock to buy? Hedge fund interest in TechnipFMC plc (NYSE:FTI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that FTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sabra Health Care REIT Inc (NASDAQ:SBRA), Acacia Communications, Inc. (NASDAQ:ACIA), and Stitch Fix, Inc. (NASDAQ:SFIX) to gather more data points.

Video: 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’ 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 S&P 500 ETFs by 66 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 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.

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to analyze the recent hedge fund action regarding TechnipFMC plc (NYSE:FTI).

Do Hedge Funds Think FTI Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in FTI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in TechnipFMC plc (NYSE:FTI) was held by Pzena Investment Management, which reported holding $154.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $98.4 million position. Other investors bullish on the company included Antipodes Partners, Arrowstreet Capital, and Platinum Asset Management. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to TechnipFMC plc (NYSE:FTI), around 4.28% of its 13F portfolio. Antipodes Partners is also relatively very bullish on the stock, earmarking 2.94 percent of its 13F equity portfolio to FTI.

Seeing as TechnipFMC plc (NYSE:FTI) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of funds that decided to sell off their full holdings heading into Q4. At the top of the heap, Michael Gelband’s ExodusPoint Capital said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, worth close to $5.7 million in stock, and Todd J. Kantor’s Encompass Capital Advisors was right behind this move, as the fund dumped about $4.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to TechnipFMC plc (NYSE:FTI). These stocks are Sabra Health Care REIT Inc (NASDAQ:SBRA), Acacia Communications, Inc. (NASDAQ:ACIA), Stitch Fix, Inc. (NASDAQ:SFIX), Equinox Gold Corp. (NYSE:EQX), Telecom Argentina S.A. (NYSE:TEO), PotlatchDeltic Corporation (NASDAQ:PCH), and Lemonade, Inc. (NYSE:LMND). This group of stocks’ market values resemble FTI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $549 million in FTI’s case. Acacia Communications, Inc. (NASDAQ:ACIA) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 5 bullish hedge fund positions. TechnipFMC plc (NYSE:FTI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FTI is 75.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on FTI as the stock returned 50.2% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.