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Did Hedge Funds Make The Right Call On Comfort Systems USA, Inc. (FIX) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Comfort Systems USA, Inc. (NYSE:FIX) and determine whether the smart money was really smart about this stock.

Comfort Systems USA, Inc. (NYSE:FIX) was in 20 hedge funds’ portfolios at the end of March. FIX has seen a decrease in support from the world’s most elite money managers lately. There were 24 hedge funds in our database with FIX positions at the end of the previous quarter. Our calculations also showed that FIX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

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 tripled 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a glance at the fresh hedge fund action surrounding Comfort Systems USA, Inc. (NYSE:FIX).

What does smart money think about Comfort Systems USA, Inc. (NYSE:FIX)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FIX over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Comfort Systems USA, Inc. (NYSE:FIX) was held by Royce & Associates, which reported holding $14 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $11.4 million position. Other investors bullish on the company included GLG Partners, Ancora Advisors, and Impax Asset Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Comfort Systems USA, Inc. (NYSE:FIX), around 0.73% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to FIX.

Since Comfort Systems USA, Inc. (NYSE:FIX) has faced declining sentiment from the smart money, logic holds that there was a specific group of hedge funds that slashed their entire stakes by the end of the first quarter. It’s worth mentioning that Richard S. Meisenberg’s ACK Asset Management dropped the largest investment of all the hedgies followed by Insider Monkey, valued at about $19.9 million in stock. George Baxter’s fund, Sabrepoint Capital, also sold off its stock, about $1.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Comfort Systems USA, Inc. (NYSE:FIX) but similarly valued. We will take a look at PagerDuty, Inc. (NYSE:PD), Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), Cortexyme, Inc. (NASDAQ:CRTX), and AtriCure Inc. (NASDAQ:ATRC). This group of stocks’ market caps resemble FIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PD 25 54152 10
KLIC 19 231499 -3
CRTX 6 14838 5
ATRC 20 185400 2
Average 17.5 121472 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $72 million in FIX’s case. PagerDuty, Inc. (NYSE:PD) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 6 bullish hedge fund positions. Comfort Systems USA, Inc. (NYSE:FIX) is not the most popular stock in this group but hedge fund interest is still above average. 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately FIX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FIX were disappointed as the stock returned 18.1% 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.

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