Is ForeScout Technologies, Inc. (NASDAQ:FSCT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to check out the latest hedge fund action surrounding ForeScout Technologies, Inc. (NASDAQ:FSCT).
How have hedgies been trading ForeScout Technologies, Inc. (NASDAQ:FSCT)?
Heading into the fourth quarter of 2018, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FSCT over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Eminence Capital held the most valuable stake in ForeScout Technologies, Inc. (NASDAQ:FSCT), which was worth $60.6 million at the end of the third quarter. On the second spot was Jericho Capital Asset Management which amassed $46.4 million worth of shares. Moreover, Marshall Wace LLP, North Run Capital, and Citadel Investment Group were also bullish on ForeScout Technologies, Inc. (NASDAQ:FSCT), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Eminence Capital, managed by Ricky Sandler, initiated the most outsized position in ForeScout Technologies, Inc. (NASDAQ:FSCT). Eminence Capital had $60.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $23.8 million position during the quarter. The other funds with new positions in the stock are Thomas Ellis and Todd Hammer’s North Run Capital, Jim Simons’s Renaissance Technologies, and David Costen Haley’s HBK Investments.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ForeScout Technologies, Inc. (NASDAQ:FSCT) but similarly valued. These stocks are iShares PHLX Semiconductor ETF (NASDAQ:SOXX), Hub Group Inc (NASDAQ:HUBG), Core-Mark Holding Company, Inc. (NASDAQ:CORE), and GameStop Corp. (NYSE:GME). All of these stocks’ market caps are similar to FSCT’s market cap.
|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 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $184 million in FSCT’s case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand iShares PHLX Semiconductor ETF (NASDAQ:SOXX) is the least popular one with only 2 bullish hedge fund positions. ForeScout Technologies, Inc. (NASDAQ:FSCT) 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. In this regard HUBG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.