Hedge Funds Are Souring On Resideo Technologies, Inc. (REZI)

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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Resideo Technologies, Inc. (NYSE:REZI).

Is Resideo Technologies, Inc. (NYSE:REZI) going to take off soon? The smart money was getting less bullish. The number of bullish hedge fund positions retreated by 4 in recent months. Resideo Technologies, Inc. (NYSE:REZI) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that REZI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 31 hedge funds in our database with REZI holdings at the end of December.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 we’re going to check out the latest hedge fund action encompassing Resideo Technologies, Inc. (NYSE:REZI).

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

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in REZI over the last 23 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is REZI A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Praesidium Investment Management Company, managed by Kevin Oram and Peter Uddo, holds the number one position in Resideo Technologies, Inc. (NYSE:REZI). Praesidium Investment Management Company has a $234.4 million position in the stock, comprising 12.1% of its 13F portfolio. Sitting at the No. 2 spot is Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $107.3 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Some other peers that hold long positions consist of Michael Doheny’s Freshford Capital Management, D. E. Shaw’s D E Shaw and David Einhorn’s Greenlight Capital. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Resideo Technologies, Inc. (NYSE:REZI), around 12.09% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, setting aside 9.95 percent of its 13F equity portfolio to REZI.

Due to the fact that Resideo Technologies, Inc. (NYSE:REZI) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few fund managers who sold off their full holdings in the first quarter. Intriguingly, Mark Coe’s Intrinsic Edge Capital dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $13.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $10.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Resideo Technologies, Inc. (NYSE:REZI) but similarly valued. We will take a look at QTS Realty Trust Inc (NYSE:QTS), Allegiant Travel Company (NASDAQ:ALGT), Watts Water Technologies Inc (NYSE:WTS), Itron, Inc. (NASDAQ:ITRI), SmileDirectClub, Inc. (NASDAQ:SDC), Terreno Realty Corporation (NYSE:TRNO), and Taylor Morrison Home Corp (NYSE:TMHC). This group of stocks’ market caps match REZI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QTS 22 451242 -1
ALGT 22 402206 3
WTS 18 398034 0
ITRI 29 365455 23
SDC 21 177116 -4
TRNO 12 43004 3
TMHC 22 218154 -11
Average 20.9 293602 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $667 million in REZI’s case. Itron, Inc. (NASDAQ:ITRI) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 12 bullish hedge fund positions. Resideo Technologies, Inc. (NYSE:REZI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for REZI is 68.3. 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 positive signal but 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately REZI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on REZI were disappointed as the stock returned 4.2% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.

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