Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of FormFactor, Inc. (NASDAQ:FORM) based on that data.
FormFactor, Inc. (NASDAQ:FORM) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of March. At the end of this article we will also compare FORM to other stocks including Macy’s, Inc. (NYSE:M), Aaron’s, Inc. (NYSE:AAN), and First Midwest Bancorp Inc (NASDAQ:FMBI) to get a better sense of its popularity.
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 58 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.
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 let’s analyze the latest hedge fund action regarding FormFactor, Inc. (NASDAQ:FORM).
How have hedgies been trading FormFactor, Inc. (NASDAQ:FORM)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in FORM a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in FormFactor, Inc. (NASDAQ:FORM), which was worth $24.2 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $15.7 million worth of shares. Millennium Management, Driehaus Capital, and Arrowstreet Capital 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 Zebra Capital Management allocated the biggest weight to FormFactor, Inc. (NASDAQ:FORM), around 0.77% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, dishing out 0.59 percent of its 13F equity portfolio to FORM.
Since FormFactor, Inc. (NASDAQ:FORM) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there were a few money managers that elected to cut their entire stakes heading into Q4. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $5.4 million in stock. Donald Sussman’s fund, Paloma Partners, also cut its stock, about $1.4 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as FormFactor, Inc. (NASDAQ:FORM) but similarly valued. These stocks are Macy’s, Inc. (NYSE:M), Aaron’s, Inc. (NYSE:AAN), First Midwest Bancorp Inc (NASDAQ:FMBI), and Workiva Inc (NYSE:WK). This group of stocks’ market values match FORM’s market value.
|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 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $93 million in FORM’s case. Macy’s, Inc. (NYSE:M) is the most popular stock in this table. On the other hand First Midwest Bancorp Inc (NASDAQ:FMBI) is the least popular one with only 11 bullish hedge fund positions. FormFactor, Inc. (NASDAQ:FORM) 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on FORM as the stock returned 37% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.