Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about Plexus Corp. (NASDAQ:PLXS).
Is Plexus Corp. (NASDAQ:PLXS) a first-rate investment now? The smart money is becoming hopeful. The number of long hedge fund positions increased by 1 lately. Our calculations also showed that plxs isn’t among the 30 most popular stocks among hedge funds. PLXS was in 12 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with PLXS positions at the end of the previous quarter.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to view the recent hedge fund action regarding Plexus Corp. (NASDAQ:PLXS).
How are hedge funds trading Plexus Corp. (NASDAQ:PLXS)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in PLXS heading into this year. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Plexus Corp. (NASDAQ:PLXS), with a stake worth $41.5 million reported as of the end of September. Trailing Fisher Asset Management was Royce & Associates, which amassed a stake valued at $8.8 million. Renaissance Technologies, Citadel Investment Group, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds have jumped into Plexus Corp. (NASDAQ:PLXS) headfirst. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, initiated the most valuable position in Plexus Corp. (NASDAQ:PLXS). BlueCrest Capital Mgmt. had $0.6 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.4 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Plexus Corp. (NASDAQ:PLXS) but similarly valued. These stocks are Tri Pointe Group Inc (NYSE:TPH), Belmond Ltd (NYSE:BEL), Kronos Worldwide, Inc. (NYSE:KRO), and Ladder Capital Corp (NYSE:LADR). This group of stocks’ market caps match PLXS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPH | 17 | 117402 | -5 |
| BEL | 16 | 252781 | 2 |
| KRO | 17 | 51942 | -1 |
| LADR | 17 | 114418 | -3 |
| Average | 16.75 | 134136 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $67 million in PLXS’s case. Tri Pointe Group Inc (NYSE:TPH) is the most popular stock in this table. On the other hand Belmond Ltd (NYSE:BEL) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Plexus Corp. (NASDAQ:PLXS) is even less popular than BEL. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
