Was The Smart Money Right About First Solar, Inc. (FSLR)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in First Solar, Inc. (NASDAQ:FSLR)? The smart money sentiment can provide an answer to this question.

First Solar, Inc. (NASDAQ:FSLR) has experienced an increase in support from the world’s most elite money managers recently. First Solar, Inc. (NASDAQ:FSLR) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistic is 40. Our calculations also showed that FSLR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Philip Hempleman of Ardsley Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the recent hedge fund action surrounding First Solar, Inc. (NASDAQ:FSLR).

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

Heading into the third quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in FSLR 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.

According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the number one position in First Solar, Inc. (NASDAQ:FSLR). Citadel Investment Group has a $107.2 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Polunin Capital, managed by Douglas Harold Hart Polunin, which holds a $77.6 million position; the fund has 24% of its 13F portfolio invested in the stock. Some other peers that are bullish consist of Mike Masters’s Masters Capital Management, Jos Shaver’s Electron Capital Partners and Michael Cowley’s Sandbar Asset Management. In terms of the portfolio weights assigned to each position Polunin Capital allocated the biggest weight to First Solar, Inc. (NASDAQ:FSLR), around 23.96% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, designating 3.35 percent of its 13F equity portfolio to FSLR.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Masters Capital Management, managed by Mike Masters, created the most outsized call position in First Solar, Inc. (NASDAQ:FSLR). Masters Capital Management had $45.3 million invested in the company at the end of the quarter. Jos Shaver’s Electron Capital Partners also initiated a $40.8 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Steve Cohen’s Point72 Asset Management, and Philip Hempleman’s Ardsley Partners.

Let’s now review hedge fund activity in other stocks similar to First Solar, Inc. (NASDAQ:FSLR). We will take a look at Vertiv Holdings Co (NYSE:VRT), Reliance Steel & Aluminum Co. (NYSE:RS), NiSource Inc. (NYSE:NI), Western Alliance Bancorporation (NYSE:WAL), Upstart Holdings, Inc. (NASDAQ:UPST), Americold Realty Trust (NYSE:COLD), and First Horizon Corporation (NYSE:FHN). This group of stocks’ market caps are similar to FSLR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $678 million. That figure was $317 million in FSLR’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Americold Realty Trust (NYSE:COLD) is the least popular one with only 16 bullish hedge fund positions. First Solar, Inc. (NASDAQ:FSLR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FSLR is 70.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on FSLR as the stock returned 28.5% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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