Did Hedge Funds Make The Right Call On Fluor Corporation (FLR) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Fluor Corporation (NYSE:FLR) and determine whether hedge funds skillfully traded this stock.

Hedge fund interest in Fluor Corporation (NYSE:FLR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FLR to other stocks including Norbord Inc. (NYSE:OSB), Black Stone Minerals LP (NYSE:BSM), and Callaway Golf Company (NYSE:ELY) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are assumed to be underperforming, old financial vehicles of years past. While there are over 8000 funds with their doors open at present, Our experts look at the aristocrats of this club, approximately 850 funds. Most estimates calculate that this group of people control the majority of all hedge funds’ total capital, and by watching their top stock picks, Insider Monkey has brought to light several investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Rogers Ariel Investments

John Rogers of Ariel Investments

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. 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 if you have any good ideas send us an email. Now we’re going to take a look at the key hedge fund action encompassing Fluor Corporation (NYSE:FLR).

What have hedge funds been doing with Fluor Corporation (NYSE:FLR)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in FLR 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.

Is FLR A Good Stock To Buy?

Among these funds, D E Shaw held the most valuable stake in Fluor Corporation (NYSE:FLR), which was worth $24.1 million at the end of the third quarter. On the second spot was Empyrean Capital Partners which amassed $20.6 million worth of shares. Two Sigma Advisors, Newtyn Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Newtyn Management allocated the biggest weight to Fluor Corporation (NYSE:FLR), around 3.39% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, setting aside 1.42 percent of its 13F equity portfolio to FLR.

Judging by the fact that Fluor Corporation (NYSE:FLR) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their full holdings last quarter. It’s worth mentioning that John W. Rogers’s Ariel Investments dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $31.2 million in stock, and Clint Murray’s Lodge Hill Capital was right behind this move, as the fund dropped about $9.6 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Fluor Corporation (NYSE:FLR) but similarly valued. We will take a look at Norbord Inc. (NYSE:OSB), Black Stone Minerals LP (NYSE:BSM), Callaway Golf Company (NYSE:ELY), and OceanFirst Financial Corp. (NASDAQ:OCFC). This group of stocks’ market valuations resemble FLR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OSB 12 19441 -4
BSM 3 2190 -1
ELY 23 120223 3
OCFC 9 28760 -6
Average 11.75 42654 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $94 million in FLR’s case. Callaway Golf Company (NYSE:ELY) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Fluor Corporation (NYSE:FLR) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on FLR as the stock returned 74.8% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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