Were Hedge Funds Right About Embracing FleetCor Technologies, Inc. (FLT)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of FleetCor Technologies, Inc. (NYSE:FLT).

FleetCor Technologies, Inc. (NYSE:FLT) was in 53 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 60. FLT has seen an increase in hedge fund sentiment in recent months. There were 51 hedge funds in our database with FLT holdings at the end of March. Our calculations also showed that FLT 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).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. 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 to get excerpts of these letters in your inbox. Now we’re going to take a look at the fresh hedge fund action encompassing FleetCor Technologies, Inc. (NYSE:FLT).

Hedge fund activity in FleetCor Technologies, Inc. (NYSE:FLT)

At Q2’s end, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the first quarter of 2020. On the other hand, there were a total of 40 hedge funds with a bullish position in FLT a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Melvin Capital Management, managed by Gabriel Plotkin, holds the largest position in FleetCor Technologies, Inc. (NYSE:FLT). Melvin Capital Management has a $344.9 million position in the stock, comprising 2% of its 13F portfolio. Coming in second is Tiger Global Management LLC, managed by Chase Coleman, which holds a $325.8 million position; 1.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish comprise Robert Pitts’s Steadfast Capital Management, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Banbury Partners allocated the biggest weight to FleetCor Technologies, Inc. (NYSE:FLT), around 8.81% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, setting aside 8.61 percent of its 13F equity portfolio to FLT.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. D1 Capital Partners, managed by Daniel Sundheim, assembled the most outsized position in FleetCor Technologies, Inc. (NYSE:FLT). D1 Capital Partners had $77.6 million invested in the company at the end of the quarter. Jeff Lignelli’s Incline Global Management also made a $31.3 million investment in the stock during the quarter. The following funds were also among the new FLT investors: Stanley Druckenmiller’s Duquesne Capital, Leon Shaulov’s Maplelane Capital, and Anand Parekh’s Alyeska Investment Group.

Let’s also examine hedge fund activity in other stocks similar to FleetCor Technologies, Inc. (NYSE:FLT). We will take a look at Aptiv PLC (NYSE:APTV), FirstEnergy Corp. (NYSE:FE), Simon Property Group, Inc (NYSE:SPG), Canon Inc. (NYSE:CAJ), Equifax Inc. (NYSE:EFX), Cerner Corporation (NASDAQ:CERN), and Fiat Chrysler Automobiles NV (NYSE:FCAU). This group of stocks’ market values match FLT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $738 million. That figure was $2212 million in FLT’s case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks FleetCor Technologies, Inc. (NYSE:FLT) is more popular among hedge funds. Our overall hedge fund sentiment score for FLT is 83.5. 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 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 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Unfortunately FLT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FLT were disappointed as the stock returned 3% since the end of the second quarter (through 10/23) 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 most of these stocks already outperformed the market in 2020.

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