Hedge Funds Aren’t Done Buying FLIR Systems, Inc. (FLIR)

In this article we will take a look at whether hedge funds think FLIR Systems, Inc. (NASDAQ:FLIR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

FLIR Systems, Inc. (NASDAQ:FLIR) was in 34 hedge funds’ portfolios at the end of the first quarter of 2020. FLIR investors should be aware of an increase in hedge fund sentiment in recent months. There were 32 hedge funds in our database with FLIR positions at the end of the previous quarter. Our calculations also showed that FLIR 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.

Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades 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. Keeping this in mind we’re going to go over the recent hedge fund action encompassing FLIR Systems, Inc. (NASDAQ:FLIR).

How have hedgies been trading FLIR Systems, Inc. (NASDAQ:FLIR)?

Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FLIR over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in FLIR Systems, Inc. (NASDAQ:FLIR) was held by Royce & Associates, which reported holding $37.4 million worth of stock at the end of September. It was followed by Polar Capital with a $33.7 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to FLIR Systems, Inc. (NASDAQ:FLIR), around 1.48% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, earmarking 1.43 percent of its 13F equity portfolio to FLIR.

As industrywide interest jumped, some big names have jumped into FLIR Systems, Inc. (NASDAQ:FLIR) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, assembled the biggest position in FLIR Systems, Inc. (NASDAQ:FLIR). Polar Capital had $33.7 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $12.2 million investment in the stock during the quarter. The other funds with brand new FLIR positions are Renaissance Technologies, Greg Eisner’s Engineers Gate Manager, and Charles Davidson and Joseph Jacobs’s Wexford Capital.

Let’s also examine hedge fund activity in other stocks similar to FLIR Systems, Inc. (NASDAQ:FLIR). These stocks are NewMarket Corporation (NYSE:NEU), TFS Financial Corporation (NASDAQ:TFSL), Globus Medical Inc (NYSE:GMED), and Legg Mason, Inc. (NYSE:LM). This group of stocks’ market caps are similar to FLIR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEU 20 143254 -2
TFSL 9 134718 -2
GMED 19 166330 -10
LM 38 944444 1
Average 21.5 347187 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $193 million in FLIR’s case. Legg Mason, Inc. (NYSE:LM) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 9 bullish hedge fund positions. FLIR Systems, Inc. (NASDAQ:FLIR) is not the most popular stock in this group but hedge fund interest is still above 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on FLIR as the stock returned 45.4% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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