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Is Hollysys Automation Technologies Ltd (HOLI) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Hollysys Automation Technologies Ltd (NASDAQ:HOLI) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Hollysys Automation Technologies Ltd (NASDAQ:HOLI) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Golar LNG Limited (NASDAQ:GLNG), Unitil Corporation (NYSE:UTL), and Rent-A-Center Inc (NASDAQ:RCII) to gather more data points. Our calculations also showed that HOLI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To the average investor there are plenty of metrics stock market investors employ to grade publicly traded companies. Two of the less utilized metrics are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can trounce the market by a superb margin (see the details here).

Abrams Bison Investor Letters

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At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the recent hedge fund action regarding Hollysys Automation Technologies Ltd (NASDAQ:HOLI).

How are hedge funds trading Hollysys Automation Technologies Ltd (NASDAQ:HOLI)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HOLI over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Hollysys Automation Technologies Ltd (NASDAQ:HOLI) was held by Impax Asset Management, which reported holding $17.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $12.1 million position. Other investors bullish on the company included Two Sigma Advisors, Marshall Wace LLP, and Millennium Management. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Hollysys Automation Technologies Ltd (NASDAQ:HOLI), around 0.24% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to HOLI.

Judging by the fact that Hollysys Automation Technologies Ltd (NASDAQ:HOLI) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $6.7 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hollysys Automation Technologies Ltd (NASDAQ:HOLI) but similarly valued. These stocks are Golar LNG Limited (NASDAQ:GLNG), Unitil Corporation (NYSE:UTL), Rent-A-Center Inc (NASDAQ:RCII), and Coeur Mining, Inc. (NYSE:CDE). This group of stocks’ market valuations resemble HOLI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLNG 10 153667 -9
UTL 9 62219 -3
RCII 19 201014 -6
CDE 14 36482 -1
Average 13 113346 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $42 million in HOLI’s case. Rent-A-Center Inc (NASDAQ:RCII) is the most popular stock in this table. On the other hand Unitil Corporation (NYSE:UTL) is the least popular one with only 9 bullish hedge fund positions. Hollysys Automation Technologies Ltd (NASDAQ:HOLI) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately HOLI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HOLI investors were disappointed as the stock returned 3.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.