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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards FleetCor Technologies, Inc. (NYSE:FLT).
Is FleetCor Technologies, Inc. (NYSE:FLT) going to take off soon? Prominent investors are in a pessimistic mood. The number of bullish hedge fund bets retreated by 1 lately. Our calculations also showed that FLT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). FLT was in 44 hedge funds’ portfolios at the end of December. There were 45 hedge funds in our database with FLT positions at the end of the previous quarter.
Video: Click the image to 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 41 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.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when 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 analyze the key hedge fund action encompassing FleetCor Technologies, Inc. (NYSE:FLT).
Hedge fund activity in FleetCor Technologies, Inc. (NYSE:FLT)
At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FLT over the last 18 quarters. So, let’s find out 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, Chase Coleman’s Tiger Global Management LLC has the number one position in FleetCor Technologies, Inc. (NYSE:FLT), worth close to $496.9 million, accounting for 2.7% of its total 13F portfolio. On Tiger Global Management LLC’s heels is Melvin Capital Management, managed by Gabriel Plotkin, which holds a $251.8 million position; 2.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism encompass Robert Pitts’s Steadfast Capital Management, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Atalan Capital allocated the biggest weight to FleetCor Technologies, Inc. (NYSE:FLT), around 10.05% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, designating 7.89 percent of its 13F equity portfolio to FLT.
Because FleetCor Technologies, Inc. (NYSE:FLT) has faced falling interest from hedge fund managers, it’s safe to say that there is a sect of fund managers who sold off their full holdings in the third quarter. Intriguingly, Gabriel Plotkin’s Melvin Capital Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, valued at about $74.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $41 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as FleetCor Technologies, Inc. (NYSE:FLT) but similarly valued. These stocks are DTE Energy Company (NYSE:DTE), McKesson Corporation (NYSE:MCK), Twitter Inc (NYSE:TWTR), and KKR & Co Inc. (NYSE:KKR). This group of stocks’ market valuations are similar to FLT’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 49.25 hedge funds with bullish positions and the average amount invested in these stocks was $2102 million. That figure was $2122 million in FLT’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand DTE Energy Company (NYSE:DTE) is the least popular one with only 35 bullish hedge fund positions. FleetCor Technologies, Inc. (NYSE:FLT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately FLT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FLT investors were disappointed as the stock returned -22.7% 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.