At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Fox Factory Holding Corp (NASDAQ:FOXF).
Fox Factory Holding Corp (NASDAQ:FOXF) was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. FOXF has experienced an increase in enthusiasm from smart money recently. There were 13 hedge funds in our database with FOXF holdings at the end of June. Our calculations also showed that FOXF isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we’re going to check out the fresh hedge fund action surrounding Fox Factory Holding Corp (NASDAQ:FOXF).
Do Hedge Funds Think FOXF Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 69% from the second quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in FOXF a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Columbus Circle Investors, managed by Principal Global Investors, holds the biggest position in Fox Factory Holding Corp (NASDAQ:FOXF). Columbus Circle Investors has a $36 million position in the stock, comprising 1.6% of its 13F portfolio. On Columbus Circle Investors’s heels is Driehaus Capital, led by Richard Driehaus, holding a $28 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Israel Englander’s Millennium Management, Renaissance Technologies and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Columbus Circle Investors allocated the biggest weight to Fox Factory Holding Corp (NASDAQ:FOXF), around 1.57% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to FOXF.
As one would reasonably expect, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in Fox Factory Holding Corp (NASDAQ:FOXF). Millennium Management had $8.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $7 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Ian Simm’s Impax Asset Management, and Ira Unschuld’s Brant Point Investment Management.
Let’s now review hedge fund activity in other stocks similar to Fox Factory Holding Corp (NASDAQ:FOXF). We will take a look at Selective Insurance Group, Inc. (NASDAQ:SIGI), 51job, Inc. (NASDAQ:JOBS), National Vision Holdings, Inc. (NASDAQ:EYE), Altair Engineering Inc. (NASDAQ:ALTR), The Ensign Group, Inc. (NASDAQ:ENSG), Millicom International Cellular S.A. (NASDAQ:TIGO), and Artisan Partners Asset Management Inc (NYSE:APAM). This group of stocks’ market valuations are closest to FOXF’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $106 million in FOXF’s case. Artisan Partners Asset Management Inc (NYSE:APAM) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 8 bullish hedge fund positions. Fox Factory Holding Corp (NASDAQ:FOXF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FOXF is 78.9. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on FOXF as the stock returned 30.7% since the end of Q3 (through 12/14) 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.