Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Plexus Corp. (NASDAQ:PLXS).
Plexus Corp. (NASDAQ:PLXS) has experienced an increase in hedge fund sentiment lately. PLXS was in 24 hedge funds’ portfolios at the end of December. There were 8 hedge funds in our database with PLXS positions at the end of the previous quarter. Our calculations also showed that PLXS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Today there are tons of indicators shareholders employ to appraise publicly traded companies. A pair of the less known indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outpace the broader indices by a superb margin (see the details here).
Paul Marshall of Marshall Wace
Keeping this in mind we’re going to take a glance at the recent hedge fund action regarding Plexus Corp. (NASDAQ:PLXS).
What does smart money think about Plexus Corp. (NASDAQ:PLXS)?
Heading into the first quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from the third quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in PLXS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the biggest position in Plexus Corp. (NASDAQ:PLXS), worth close to $49.8 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $12.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism include Paul Marshall and Ian Wace’s Marshall Wace LLP, David Harding’s Winton Capital Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Plexus Corp. (NASDAQ:PLXS), around 0.25% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to PLXS.
As one would reasonably expect, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Plexus Corp. (NASDAQ:PLXS). Marshall Wace LLP had $10.8 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $9.3 million investment in the stock during the quarter. The other funds with brand new PLXS positions are Noam Gottesman’s GLG Partners, Ken Griffin’s Citadel Investment Group, and Renaissance Technologies.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Plexus Corp. (NASDAQ:PLXS) but similarly valued. We will take a look at SPX Corporation (NYSE:SPXC), Northwest Natural Holding Company (NYSE:NWN), Epizyme Inc (NASDAQ:EPZM), and Hertz Global Holdings, Inc. (NYSE:HTZ). This group of stocks’ market valuations are closest to PLXS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPXC | 19 | 121935 | 0 |
| NWN | 17 | 97409 | -1 |
| EPZM | 18 | 610687 | 1 |
| HTZ | 33 | 1387542 | 7 |
| Average | 21.75 | 554393 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $554 million. That figure was $120 million in PLXS’s case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Northwest Natural Holding Company (NYSE:NWN) is the least popular one with only 17 bullish hedge fund positions. Plexus Corp. (NASDAQ:PLXS) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately PLXS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PLXS were disappointed as the stock returned -29.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
