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 second 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 5 years and analyze what the smart money thinks of HEICO Corporation (NYSE:HEI) based on that data and determine whether they were really smart about the stock.
HEICO Corporation (NYSE:HEI) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistics is 57. HEI investors should pay attention to an increase in hedge fund interest in recent months. There were 39 hedge funds in our database with HEI holdings at the end of March. Our calculations also showed that HEI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let’s take a gander at the recent hedge fund action surrounding HEICO Corporation (NYSE:HEI).
Hedge fund activity in HEICO Corporation (NYSE:HEI)
At the end of the second quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HEI over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in HEICO Corporation (NYSE:HEI) was held by Renaissance Technologies, which reported holding $98 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $81.3 million position. Other investors bullish on the company included Select Equity Group, Gobi Capital, and Silver Heights Capital Management. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to HEICO Corporation (NYSE:HEI), around 20.27% of its 13F portfolio. Gobi Capital is also relatively very bullish on the stock, earmarking 4.24 percent of its 13F equity portfolio to HEI.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, assembled the biggest position in HEICO Corporation (NYSE:HEI). Holocene Advisors had $33.7 million invested in the company at the end of the quarter. Blair Baker’s Precept Capital Management also made a $7.1 million investment in the stock during the quarter. The other funds with brand new HEI positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mark Coe’s Intrinsic Edge Capital, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s check out hedge fund activity in other stocks similar to HEICO Corporation (NYSE:HEI). These stocks are Alliant Energy Corporation (NYSE:LNT), Extra Space Storage, Inc. (NYSE:EXR), IDEX Corporation (NYSE:IEX), KeyCorp (NYSE:KEY), POSCO (NYSE:PKX), NICE Ltd (NASDAQ:NICE), and Imperial Oil Limited (NYSE:IMO). This group of stocks’ market values are closest to HEI’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 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $667 million in HEI’s case. KeyCorp (NYSE:KEY) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks HEICO Corporation (NYSE:HEI) is more popular among hedge funds. Our overall hedge fund sentiment score for HEI is 84.2. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately HEI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HEI were disappointed as the stock returned 10.3% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.