Do Hedge Funds Love Fulgent Genetics, Inc. (FLGT)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Fulgent Genetics, Inc. (NASDAQ:FLGT), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Fulgent Genetics, Inc. (NASDAQ:FLGT) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. Fulgent Genetics, Inc. (NASDAQ:FLGT) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 11. Our calculations also showed that FLGT isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s go over the key hedge fund action encompassing Fulgent Genetics, Inc. (NASDAQ:FLGT).

How have hedgies been trading Fulgent Genetics, Inc. (NASDAQ:FLGT)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FLGT over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FLGT A Good Stock To Buy?

More specifically, Baker Bros. Advisors was the largest shareholder of Fulgent Genetics, Inc. (NASDAQ:FLGT), with a stake worth $21.9 million reported as of the end of September. Trailing Baker Bros. Advisors was Driehaus Capital, which amassed a stake valued at $6.2 million. Millennium Management, ExodusPoint Capital, and Citadel Investment Group 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 Driehaus Capital allocated the biggest weight to Fulgent Genetics, Inc. (NASDAQ:FLGT), around 0.13% of its 13F portfolio. Baker Bros. Advisors is also relatively very bullish on the stock, setting aside 0.09 percent of its 13F equity portfolio to FLGT.

As aggregate interest increased, specific money managers have jumped into Fulgent Genetics, Inc. (NASDAQ:FLGT) headfirst. Driehaus Capital, managed by Richard Driehaus, assembled the most outsized position in Fulgent Genetics, Inc. (NASDAQ:FLGT). Driehaus Capital had $6.2 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.6 million investment in the stock during the quarter. The other funds with brand new FLGT positions are Ken Griffin’s Citadel Investment Group and Peter Muller’s PDT Partners.

Let’s go over hedge fund activity in other stocks similar to Fulgent Genetics, Inc. (NASDAQ:FLGT). We will take a look at Dine Brands Global, Inc. (NYSE:DIN), SFL Corporation Ltd. (NYSE:SFL), AZZ Incorporated (NYSE:AZZ), Gossamer Bio, Inc. (NASDAQ:GOSS), QAD Inc. (NASDAQ:QADB), Celestica Inc. (NYSE:CLS), and Amphastar Pharmaceuticals Inc (NASDAQ:AMPH). This group of stocks’ market values match FLGT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DIN 25 150078 0
SFL 10 30526 -5
AZZ 15 66278 -5
GOSS 21 196663 2
QADB 1 752 0
CLS 15 87990 4
AMPH 8 16840 -1
Average 13.6 78447 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $33 million in FLGT’s case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand QAD Inc. (NASDAQ:QADB) is the least popular one with only 1 bullish hedge fund positions. Fulgent Genetics, Inc. (NASDAQ:FLGT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FLGT is 34.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately FLGT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FLGT investors were disappointed as the stock returned 1.5% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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