We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Floor & Decor Holdings, Inc. (NYSE:FND).
Is FND a good stock to buy now? Floor & Decor Holdings, Inc. (NYSE:FND) was in 42 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. FND has seen a decrease in activity from the world’s largest hedge funds lately. There were 44 hedge funds in our database with FND positions at the end of the second quarter. Our calculations also showed that FND isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing Floor & Decor Holdings, Inc. (NYSE:FND).
Do Hedge Funds Think FND Is A Good Stock To Buy Now?
At Q3’s end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in FND a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Floor & Decor Holdings, Inc. (NYSE:FND) was held by Abdiel Capital Advisors, which reported holding $372.8 million worth of stock at the end of September. It was followed by Two Creeks Capital Management with a $136.5 million position. Other investors bullish on the company included Park Presidio Capital, Columbus Circle Investors, and Broad Bay Capital. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Floor & Decor Holdings, Inc. (NYSE:FND), around 11.71% of its 13F portfolio. Two Creeks Capital Management is also relatively very bullish on the stock, designating 8.91 percent of its 13F equity portfolio to FND.
Since Floor & Decor Holdings, Inc. (NYSE:FND) has faced a decline in interest from the aggregate hedge fund industry, we can see that there were a few hedgies who sold off their full holdings in the third quarter. Interestingly, Philip Hempleman’s Ardsley Partners dropped the biggest investment of all the hedgies watched by Insider Monkey, totaling about $11.5 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund dumped about $9.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Floor & Decor Holdings, Inc. (NYSE:FND) but similarly valued. We will take a look at Repligen Corporation (NASDAQ:RGEN), Wynn Resorts, Limited (NASDAQ:WYNN), Mobile TeleSystems OJSC (NYSE:MBT), XPO Logistics Inc (NYSE:XPO), AGNC Investment Corp. (NASDAQ:AGNC), Iron Mountain Incorporated (NYSE:IRM), and Magellan Midstream Partners, L.P. (NYSE:MMP). All of these stocks’ market caps resemble FND’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 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $677 million. That figure was $942 million in FND’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (NYSE:MBT) is the least popular one with only 10 bullish hedge fund positions. Floor & Decor Holdings, Inc. (NYSE:FND) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FND is 80.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on FND as the stock returned 17.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.