How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Keysight Technologies Inc (NYSE:KEYS) and determine whether hedge funds had an edge regarding this stock.
Is Keysight Technologies Inc (NYSE:KEYS) a good stock to buy now? The smart money was getting more optimistic. The number of bullish hedge fund positions improved by 7 lately. Keysight Technologies Inc (NYSE:KEYS) was in 47 hedge funds’ portfolios at the end of June. The all time high for this statistics is 50. Our calculations also showed that KEYS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 40 hedge funds in our database with KEYS positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are perceived as underperforming, old investment vehicles of the past. While there are over 8000 funds with their doors open at the moment, Our researchers hone in on the upper echelon of this group, about 850 funds. These hedge fund managers direct bulk of the hedge fund industry’s total asset base, and by monitoring their first-class equity investments, Insider Monkey has unearthed a number of investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
John Rogers of Ariel Investments
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to take a glance at the fresh hedge fund action surrounding Keysight Technologies Inc (NYSE:KEYS).
How have hedgies been trading Keysight Technologies Inc (NYSE:KEYS)?
At Q2’s end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. On the other hand, there were a total of 39 hedge funds with a bullish position in KEYS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Ariel Investments was the largest shareholder of Keysight Technologies Inc (NYSE:KEYS), with a stake worth $91.1 million reported as of the end of September. Trailing Ariel Investments was Jericho Capital Asset Management, which amassed a stake valued at $60.5 million. Marshall Wace LLP, Polar Capital, and Giverny Capital 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 Giverny Capital allocated the biggest weight to Keysight Technologies Inc (NYSE:KEYS), around 4.03% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, designating 3.03 percent of its 13F equity portfolio to KEYS.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Jericho Capital Asset Management, managed by Josh Resnick, created the most outsized position in Keysight Technologies Inc (NYSE:KEYS). Jericho Capital Asset Management had $60.5 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also initiated a $30.2 million position during the quarter. The other funds with brand new KEYS positions are Michael Rockefeller and KarláKroeker’s Woodline Partners, Seth Wunder’s Black-and-White Capital, and David Fiszel’s Honeycomb Asset Management.
Let’s check out hedge fund activity in other stocks similar to Keysight Technologies Inc (NYSE:KEYS). These stocks are Wipro Limited (NYSE:WIT), Entergy Corporation (NYSE:ETR), The Trade Desk, Inc. (NASDAQ:TTD), Wayfair Inc (NYSE:W), Garmin Ltd. (NASDAQ:GRMN), Coupa Software Incorporated (NASDAQ:COUP), and Royal Bank of Scotland Group plc (NYSE:RBS). This group of stocks’ market valuations are closest to KEYS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WIT | 7 | 59120 | 0 |
| ETR | 32 | 953385 | -2 |
| TTD | 20 | 513971 | -5 |
| W | 41 | 3533920 | 7 |
| GRMN | 23 | 398083 | -4 |
| COUP | 50 | 3002984 | -16 |
| RBS | 5 | 5012 | 0 |
| Average | 25.4 | 1209496 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $1209 million. That figure was $564 million in KEYS’s case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 5 bullish hedge fund positions. Keysight Technologies Inc (NYSE:KEYS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KEYS is 84.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately KEYS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KEYS were disappointed as the stock returned -2.2% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Keysight Technologies Inc. (NYSE:KEYS)
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Disclosure: None. This article was originally published at Insider Monkey.
