Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Heico Corp (NYSE:HEI) .
Heico Corp (NYSE:HEI) was included in the equity portfolios of 20 investors tracked by Insider Monkey at the end of the third quarter of 2016. HEI investors should be aware of a decrease in hedge fund sentiment. There had been 23 hedge funds in our database with HEI positions at the end of June. At the end of this article we will also compare HEI to other stocks including Guidewire Software Inc (NYSE:GWRE), Taubman Centers, Inc. (NYSE:TCO), and Toll Brothers Inc (NYSE:TOL) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to take a look at the key action encompassing Heico Corp (NYSE:HEI).
Hedge fund activity in Heico Corp (NYSE:HEI)
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 13% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in HEI over the last 5 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Select Equity Group, led by Robert Joseph Caruso, holds the number one position in Heico Corp (NYSE:HEI). Select Equity Group has a $92.5 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by Ken Fisher’s Fisher Asset Management, with a $70.6 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Chuck Royce’s Royce & Associates, Robert Joseph Caruso’s Select Equity Group and Chuck Royce’s Royce & Associates. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Heico Corp (NYSE:HEI) has weathered bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of hedgies that slashed their full holdings by the end of the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group cashed in the biggest investment of all the hedgies watched by Insider Monkey, comprising about $12.4 million in stock. Alexander Captain’s fund, Cat Rock Capital, also dropped its stock worth about $4.9 million.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Heico Corp (NYSE:HEI) but similarly valued. These stocks are Guidewire Software Inc (NYSE:GWRE), Taubman Centers, Inc. (NYSE:TCO), Toll Brothers Inc (NYSE:TOL), and Gentex Corporation (NASDAQ:GNTX). This group of stocks’ market caps are similar to HEI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 23 funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $380 million in HEI’s case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table with 29 funds holding shares. On the other hand Taubman Centers, Inc. (NYSE:TCO) is the least popular one with only 19 bullish hedge fund positions. Heico Corp (NYSE:HEI) 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. In this regard Toll Brothers Inc (NYSE:TOL) might be a better candidate to consider taking a long position in.