Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Flexsteel Industries, Inc. (NASDAQ:FLXS).
Is Flexsteel Industries, Inc. (NASDAQ:FLXS) a marvelous investment now? The smart money is indeed becoming more confident. The number of long hedge fund bets moved up by 2 lately. FLXS was in 8 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with FLXS holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as First Bancorp (NASDAQ:FBNC), Whitestone REIT (NYSE:WSR), and NanoString Technologies Inc (NASDAQ:NSTG) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
What does the smart money think about Flexsteel Industries, Inc. (NASDAQ:FLXS)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 33% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in FLXS at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Flexsteel Industries, Inc. (NASDAQ:FLXS), worth close to $55.7 million. On Royce & Associates’s heels is Peter Algert and Kevin Coldiron of Algert Coldiron Investors, with a $1.5 million position. Some other peers that hold long positions contain John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.