It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like HEICO Corporation (NYSE:HEI).
Is HEICO Corporation (NYSE:HEI) ready to rally soon? The best stock pickers are getting more optimistic. The number of bullish hedge fund bets increased by 5 recently. HEI was in 26 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with HEI holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Akorn, Inc. (NASDAQ:AKRX), Cepheid (NASDAQ:CPHD), and IDACORP Inc (NYSE:IDA) to gather more data points.
To most traders, hedge funds are viewed as slow, outdated investment vehicles of years past. While there are more than 8000 funds in operation at present, We look at the masters of this club, around 700 funds. These money managers direct the lion’s share of the smart money’s total capital, and by keeping an eye on their inimitable stock picks, Insider Monkey has discovered a few investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to go over the key action regarding HEICO Corporation (NYSE:HEI).
Hedge fund activity in HEICO Corporation (NYSE:HEI)
Heading into Q4, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Bares Capital Management, managed by Brian Bares, holds the number one position in HEICO Corporation (NYSE:HEI). Bares Capital Management has a $86 million position in the stock, comprising 8.5% of its 13F portfolio. The second most bullish fund manager is Robert Joseph Caruso of Select Equity Group, with a $59 million position; 0.6% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism contain Ken Fisher’s Fisher Asset Management and Chuck Royce’s Royce & Associates.
As one would reasonably expect, some big names were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the most outsized position in HEICO Corporation (NYSE:HEI). Two Sigma Advisors had $3.3 million invested in the company at the end of the quarter. Millennium Management Subsidiary’s Green Arrow Capital Management also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new HEI investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management, and David Costen Haley’s HBK Investments.
Let’s now take a look at hedge fund activity in other stocks similar to HEICO Corporation (NYSE:HEI). These stocks are Akorn, Inc. (NASDAQ:AKRX), Cepheid (NASDAQ:CPHD), IDACORP Inc (NYSE:IDA), and Apple Hospitality REIT Inc (NYSE:APLE). All of these stocks’ market caps resemble 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 19 hedge funds with bullish positions and the average amount invested in these stocks was $260 million, below the $408 million figure that hedge funds held in aggregate invested in HEI. Akorn, Inc. (NASDAQ:AKRX) is the most popular stock in this table. On the other hand, Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 5 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AKRX might be a better candidate to consider a long position.