The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider HEICO Corporation (NYSE:HEI) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is HEI a good stock to buy now? HEICO Corporation (NYSE:HEI) has seen a decrease in hedge fund sentiment lately. HEICO Corporation (NYSE:HEI) was in 43 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 57. There were 46 hedge funds in our database with HEI positions at the end of the second quarter. Our calculations also showed that HEI 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.
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 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 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.
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 take a look at the fresh hedge fund action encompassing HEICO Corporation (NYSE:HEI).
Do Hedge Funds Think HEI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2020. On the other hand, there were a total of 46 hedge funds with a bullish position in HEI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in HEICO Corporation (NYSE:HEI), which was worth $88.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $85.7 million worth of shares. Fisher Asset Management, Gobi Capital, and Giverny Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to HEICO Corporation (NYSE:HEI), around 21.1% of its 13F portfolio. Gobi Capital is also relatively very bullish on the stock, designating 7.16 percent of its 13F equity portfolio to HEI.
Seeing as HEICO Corporation (NYSE:HEI) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few money managers that slashed their positions entirely in the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group cut the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $5.4 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dumped its stock, about $1.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as HEICO Corporation (NYSE:HEI) but similarly valued. We will take a look at Catalent Inc (NYSE:CTLT), Brookfield Infrastructure Partners L.P. (NYSE:BIP), Tiffany & Co. (NYSE:TIF), Wix.Com Ltd (NASDAQ:WIX), PerkinElmer, Inc. (NYSE:PKI), Tyler Technologies, Inc. (NYSE:TYL), and Nomura Holdings, Inc. (NYSE:NMR). This group of stocks’ market valuations are closest to HEI’s market valuation.
|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 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $908 million. That figure was $712 million in HEI’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 bullish hedge fund positions. HEICO Corporation (NYSE:HEI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HEI is 58.3. 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 HEI as the stock returned 26.3% 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.