Hedge Funds Aren’t Crazy About Fulgent Genetics, Inc. (FLGT) Anymore

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Fulgent Genetics, Inc. (NASDAQ:FLGT) based on that data.

Fulgent Genetics, Inc. (NASDAQ:FLGT) was in 9 hedge funds’ portfolios at the end of March. FLGT has seen a decrease in activity from the world’s largest hedge funds lately. There were 11 hedge funds in our database with FLGT positions at the end of the previous quarter. Our calculations also showed that FLGT 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind let’s analyze the fresh hedge fund action regarding Fulgent Genetics, Inc. (NASDAQ:FLGT).

What have hedge funds been doing with Fulgent Genetics, Inc. (NASDAQ:FLGT)?

Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FLGT over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, Driehaus Capital was the largest shareholder of Fulgent Genetics, Inc. (NASDAQ:FLGT), with a stake worth $7.2 million reported as of the end of September. Trailing Driehaus Capital was Baker Bros. Advisors, which amassed a stake valued at $6.1 million. Millennium Management, ExodusPoint Capital, and PDT Partners 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 0.24% of its 13F portfolio. Baker Bros. Advisors is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to FLGT.

Judging by the fact that Fulgent Genetics, Inc. (NASDAQ:FLGT) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few money managers that elected to cut their full holdings heading into Q4. Intriguingly, Chuck Royce’s Royce & Associates sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $0.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $0.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fulgent Genetics, Inc. (NASDAQ:FLGT) but similarly valued. We will take a look at CIRCOR International, Inc. (NYSE:CIR), Sutro Biopharma, Inc. (NASDAQ:STRO), EZCORP Inc (NASDAQ:EZPW), and RISE Education Cayman Ltd (NASDAQ:REDU). 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
CIR 12 41990 2
STRO 13 49596 -1
EZPW 15 49680 -6
REDU 2 733 -1
Average 10.5 35500 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $15 million in FLGT’s case. EZCORP Inc (NASDAQ:EZPW) is the most popular stock in this table. On the other hand RISE Education Cayman Ltd (NASDAQ:REDU) is the least popular one with only 2 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 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on FLGT as the stock returned 59.8% during 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.