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Hedge Funds Aren’t Crazy About Keysight Technologies Inc (KEYS) Anymore

In this article you are going to find out whether hedge funds think Keysight Technologies Inc (NYSE:KEYS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Keysight Technologies Inc (NYSE:KEYS) a bargain? Hedge funds are taking a bearish view. The number of long hedge fund positions were cut by 9 in recent months. Our calculations also showed that KEYS 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action regarding Keysight Technologies Inc (NYSE:KEYS).

How have hedgies been trading Keysight Technologies Inc (NYSE:KEYS)?

Heading into the second quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KEYS over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Keysight Technologies Inc (NYSE:KEYS) was held by Southport Management, which reported holding $418.4 million worth of stock at the end of September. It was followed by Ariel Investments with a $100.7 million position. Other investors bullish on the company included Holocene Advisors, Citadel Investment Group, and GLG Partners. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Keysight Technologies Inc (NYSE:KEYS), around 4.74% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, designating 4.66 percent of its 13F equity portfolio to KEYS.

Due to the fact that Keysight Technologies Inc (NYSE:KEYS) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that decided to sell off their full holdings in the third quarter. Interestingly, Baker Burleson and Stormy Scott’s Banbury Partners said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, totaling about $28.7 million in stock. Michael Rockefeller and KarláKroeker’s fund, Woodline Partners, also cut its stock, about $25.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 9 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Keysight Technologies Inc (NYSE:KEYS) but similarly valued. We will take a look at Nasdaq, Inc. (NASDAQ:NDAQ), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), Corning Incorporated (NYSE:GLW), and Arista Networks Inc (NYSE:ANET). This group of stocks’ market caps are similar to KEYS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NDAQ 26 112042 1
ODFL 33 347639 -1
GLW 30 106293 -5
ANET 24 470614 -2
Average 28.25 259147 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $991 million in KEYS’s case. Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Keysight Technologies Inc (NYSE:KEYS) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on KEYS as the stock returned 29.2% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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