Hedge Funds Are Crazy About Franklin Electric Co., Inc. (FELE)

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Franklin Electric Co., Inc. (NASDAQ:FELE).

Is Franklin Electric Co., Inc. (NASDAQ:FELE) a healthy stock for your portfolio? The best stock pickers were becoming hopeful. The number of long hedge fund bets advanced by 3 recently. Franklin Electric Co., Inc. (NASDAQ:FELE) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FELE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now let’s check out the new hedge fund action surrounding Franklin Electric Co., Inc. (NASDAQ:FELE).

Do Hedge Funds Think FELE Is A Good Stock To Buy Now?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in FELE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Impax Asset Management was the largest shareholder of Franklin Electric Co., Inc. (NASDAQ:FELE), with a stake worth $150.6 million reported as of the end of March. Trailing Impax Asset Management was GAMCO Investors, which amassed a stake valued at $21 million. GLG Partners, Millennium Management, and Renaissance Technologies 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 Impax Asset Management allocated the biggest weight to Franklin Electric Co., Inc. (NASDAQ:FELE), around 0.77% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.64 percent of its 13F equity portfolio to FELE.

As industrywide interest jumped, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the most valuable position in Franklin Electric Co., Inc. (NASDAQ:FELE). Millennium Management had $7 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $1.5 million position during the quarter. The other funds with brand new FELE positions are Mika Toikka’s AlphaCrest Capital Management, Donald Sussman’s Paloma Partners, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Franklin Electric Co., Inc. (NASDAQ:FELE) but similarly valued. We will take a look at Univar Solutions Inc (NYSE:UNVR), Nektar Therapeutics (NASDAQ:NKTR), Desktop Metal, Inc. (NYSE:DM), Sleep Number Corporation (NASDAQ:SNBR), Urban Outfitters, Inc. (NASDAQ:URBN), Investors Bancorp, Inc. (NASDAQ:ISBC), and Beacon Roofing Supply, Inc. (NASDAQ:BECN). This group of stocks’ market values are similar to FELE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNVR 25 742227 -6
NKTR 18 234537 -1
DM 20 216231 -4
SNBR 21 256554 5
URBN 23 140764 -1
ISBC 12 78620 -12
BECN 21 411376 -2
Average 20 297187 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $209 million in FELE’s case. Univar Solutions Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Investors Bancorp, Inc. (NASDAQ:ISBC) is the least popular one with only 12 bullish hedge fund positions. Franklin Electric Co., Inc. (NASDAQ:FELE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FELE is 68.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately FELE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FELE investors were disappointed as the stock returned 1.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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