Did Hedge Funds Drop The Ball On Floor & Decor Holdings, Inc. (FND) ?

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Floor & Decor Holdings, Inc. (NYSE:FND) from the perspective of those elite funds.

Floor & Decor Holdings, Inc. (NYSE:FND) was in 19 hedge funds’ portfolios at the end of December. FND shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 25 hedge funds in our database with FND holdings at the end of the previous quarter. Our calculations also showed that fnd isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin

Let’s check out the key hedge fund action surrounding Floor & Decor Holdings, Inc. (NYSE:FND).

What have hedge funds been doing with Floor & Decor Holdings, Inc. (NYSE:FND)?

Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the second quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in FND a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with FND Positions

The largest stake in Floor & Decor Holdings, Inc. (NYSE:FND) was held by Joho Capital, which reported holding $144.6 million worth of stock at the end of September. It was followed by Broad Bay Capital with a $12.1 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Marshall Wace LLP.

Seeing as Floor & Decor Holdings, Inc. (NYSE:FND) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who sold off their full holdings in the third quarter. Interestingly, Jeffrey Talpins’s Element Capital Management said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $30 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund said goodbye to about $18.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 6 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Floor & Decor Holdings, Inc. (NYSE:FND). These stocks are Univar Inc (NYSE:UNVR), Altus Midstream Company (NASDAQ:ALTM), Aspen Insurance Holdings Limited (NYSE:AHL), and Alarm.com Holdings, Inc. (NASDAQ:ALRM). This group of stocks’ market valuations resemble FND’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNVR 23 701477 -10
ALTM 5 41552 -11
AHL 21 416077 1
ALRM 15 267061 3
Average 16 356542 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $213 million in FND’s case. Univar Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Altus Midstream Company (NASDAQ:ALTM) is the least popular one with only 5 bullish hedge fund positions. Floor & Decor Holdings, Inc. (NYSE:FND) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on FND as the stock returned 75.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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