We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Littelfuse, Inc. (NASDAQ:LFUS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Littelfuse, Inc. (NASDAQ:LFUS) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that LFUS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the fresh hedge fund action encompassing Littelfuse, Inc. (NASDAQ:LFUS).
How have hedgies been trading Littelfuse, Inc. (NASDAQ:LFUS)?
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LFUS over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Littelfuse, Inc. (NASDAQ:LFUS), with a stake worth $81.5 million reported as of the end of September. Trailing Fisher Asset Management was Ariel Investments, which amassed a stake valued at $77.7 million. Impax Asset Management, Giverny Capital, and GAMCO Investors 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 Ayrshire Capital Management allocated the biggest weight to Littelfuse, Inc. (NASDAQ:LFUS), around 2.16% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, dishing out 2.01 percent of its 13F equity portfolio to LFUS.
Now, key money managers were leading the bulls’ herd. Ayrshire Capital Management, managed by John Nevin Jr, established the largest position in Littelfuse, Inc. (NASDAQ:LFUS). Ayrshire Capital Management had $2.6 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new LFUS position is Renaissance Technologies.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Littelfuse, Inc. (NASDAQ:LFUS) but similarly valued. We will take a look at Beyond Meat, Inc. (NASDAQ:BYND), Ritchie Bros. Auctioneers (NYSE:RBA), Allakos Inc. (NASDAQ:ALLK), and Eldorado Resorts Inc (NASDAQ:ERI). This group of stocks’ market values match LFUS’s market value.
|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 26 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $301 million in LFUS’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 15 bullish hedge fund positions. Littelfuse, Inc. (NASDAQ:LFUS) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately LFUS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LFUS investors were disappointed as the stock returned -34.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.