In this article we are going to use hedge fund sentiment as a tool and determine whether Littelfuse, Inc. (NASDAQ:LFUS) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is LFUS a good stock to buy now? Littelfuse, Inc. (NASDAQ:LFUS) investors should pay attention to a decrease in hedge fund sentiment of late. Littelfuse, Inc. (NASDAQ:LFUS) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that LFUS 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).
Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Rogers of Ariel Investments
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s take a look at the fresh hedge fund action encompassing Littelfuse, Inc. (NASDAQ:LFUS).
Do Hedge Funds Think LFUS Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in LFUS a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Impax Asset Management was the largest shareholder of Littelfuse, Inc. (NASDAQ:LFUS), with a stake worth $117 million reported as of the end of September. Trailing Impax Asset Management was Ariel Investments, which amassed a stake valued at $67.5 million. Fisher Asset Management, Columbus Circle Investors, and Royce & Associates 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 Ayrshire Capital Management allocated the biggest weight to Littelfuse, Inc. (NASDAQ:LFUS), around 1.55% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 1.48 percent of its 13F equity portfolio to LFUS.
Seeing as Littelfuse, Inc. (NASDAQ:LFUS) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds who were dropping their positions entirely heading into Q4. Interestingly, Anthony S. Daffer’s Provenire Capital dumped the largest stake of all the hedgies watched by Insider Monkey, comprising about $1.4 million in stock. Lee Ainslie’s fund, Maverick Capital, also dropped its stock, about $0.4 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Littelfuse, Inc. (NASDAQ:LFUS). These stocks are Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Starwood Property Trust, Inc. (NYSE:STWD), Ashland Global Holdings Inc.. (NYSE:ASH), China Biologic Products Holdings Inc (NASDAQ:CBPO), Silicon Laboratories (NASDAQ:SLAB), Sinopec Shanghai Petrochemical Co. (NYSE:SHI), and Agora, Inc. (NASDAQ:API). This group of stocks’ market valuations are similar to LFUS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARNA | 43 | 989966 | 2 |
| STWD | 17 | 93721 | -5 |
| ASH | 46 | 1104849 | 14 |
| CBPO | 18 | 848680 | -5 |
| SLAB | 26 | 99748 | -2 |
| SHI | 3 | 10098 | 0 |
| API | 24 | 116132 | -5 |
| Average | 25.3 | 466171 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $466 million. That figure was $352 million in LFUS’s case. Ashland Global Holdings Inc.. (NYSE:ASH) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Littelfuse, Inc. (NASDAQ:LFUS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LFUS is 52.6. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on LFUS as the stock returned 37.4% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
