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Fox Factory Holding Corp (FOXF): Hedge Funds Dropped The Ball

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 Fox Factory Holding Corp (NASDAQ:FOXF) and determine whether the smart money was really smart about this stock.

Fox Factory Holding Corp (NASDAQ:FOXF) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. FOXF was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. There were 13 hedge funds in our database with FOXF positions at the end of the previous quarter. Our calculations also showed that FOXF 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.

According to most stock holders, hedge funds are perceived as worthless, old financial vehicles of the past. While there are over 8000 funds trading at present, Our researchers choose to focus on the aristocrats of this group, approximately 850 funds. These money managers shepherd most of all hedge funds’ total capital, and by monitoring their unrivaled stock picks, Insider Monkey has uncovered many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year 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 .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the fresh hedge fund action surrounding Fox Factory Holding Corp (NASDAQ:FOXF).

How are hedge funds trading Fox Factory Holding Corp (NASDAQ:FOXF)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FOXF over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is FOXF A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Fox Factory Holding Corp (NASDAQ:FOXF). Citadel Investment Group has a $3.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $2.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Fox Factory Holding Corp (NASDAQ:FOXF), around 0.17% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to FOXF.

Due to the fact that Fox Factory Holding Corp (NASDAQ:FOXF) has faced falling interest from hedge fund managers, it’s safe to say that there were a few fund managers who sold off their full holdings by the end of the first quarter. At the top of the heap, Jay Genzer’s Thames Capital Management dumped the largest stake of all the hedgies tracked by Insider Monkey, worth close to $1.8 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund said goodbye to about $0.8 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Fox Factory Holding Corp (NASDAQ:FOXF). We will take a look at Bottomline Technologies (NASDAQ:EPAY), Goosehead Insurance, Inc. (NASDAQ:GSHD), Alliance Data Systems Corporation (NYSE:ADS), and Plexus Corp. (NASDAQ:PLXS). All of these stocks’ market caps match FOXF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPAY 18 73371 1
GSHD 11 62673 2
ADS 30 245871 -15
PLXS 16 63502 -8
Average 18.75 111354 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $15 million in FOXF’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Fox Factory Holding Corp (NASDAQ:FOXF) is even less popular than GSHD. Hedge funds clearly dropped the ball on FOXF as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on FOXF as the stock returned 96.7% in the second quarter and outperformed the market by an even larger margin.

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