Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Flowserve Corporation (NYSE:FLS) from the perspective of those elite funds.
Is Flowserve Corporation (NYSE:FLS) a healthy stock for your portfolio? The smart money is taking a pessimistic view. The number of bullish hedge fund positions were trimmed by 7 recently. At the end of this article we will also compare Science Applications International Corp (NYSE:SAIC) to other stocks including Open Text Corporation (USA) (NASDAQ:OTEX), The Madison Square Garden Co (NYSE:MSG), and Lions Gate Entertainment Corp. (USA) (NYSE:LGF) to get a better sense of its popularity.
In the eyes of most investors, hedge funds are assumed to be worthless, old financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, our researchers look at the masters of this group, around 700 funds. These money managers handle bulk of the hedge fund industry’s total asset base, and by observing their unrivaled investments, Insider Monkey has figured out various investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, we’re going to take a look at the fresh action regarding Flowserve Corporation (NYSE:FLS).
How have hedgies been trading Flowserve Corporation (NYSE:FLS)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish in this stock, a drop of 22% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the hedgies followed by Insider Monkey, Mario Gabelli’s GAMCO Investors had the most valuable position in Flowserve Corporation (NYSE:FLS), worth close to $108.6 million, corresponding to 0.7% of its total 13F portfolio. Sitting at the No. 2 spot is Charles de Vaulx of International Value Advisers, with a $52.9 million position; the fund has 1.4% of its 13F portfolio invested in the stock. The remaining members of the smart money with similar optimism encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Anand Parekh’s Alyeska Investment Group and Ian Simm’s Impax Asset Management.
Judging by the fact that Flowserve Corporation (NYSE:FLS) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that slashed their entire stakes last quarter. Intriguingly, Ricky Sandler’s Eminence Capital cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $66.1 million in shares. Christopher MedlockáJames’ fund, Partner Fund Management, also sold off its stock, about $41.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 7 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Flowserve Corporation (NYSE:FLS) but similarly valued. These stocks are Open Text Corporation (USA) (NASDAQ:OTEX), The Madison Square Garden Co (NYSE:MSG), Lions Gate Entertainment Corp. (USA) (NYSE:LGF), and Lazard Ltd (NYSE:LAZ). All of these stocks’ market caps match Flowserve Corporation (NYSE:FLS)’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 24 hedge funds with bullish positions and the average amount invested in these stocks was $1.05 billion, versus $643 million in Flowserve Corporation (NYSE:FLS)’s case. Lions Gate Entertainment Corp. (USA) (NYSE:LGF) is the most popular stock in this table. On the other hand, Open Text Corporation (USA) (NASDAQ:OTEX) is the least popular one with only 18 bullish hedge fund positions. Flowserve Corporation (NYSE:FLS) 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 Lions Gate Entertainment Corp. (USA) (NYSE:LGF) might be a better candidate to consider for an investment.