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Is Littelfuse, Inc. (LFUS) Going to Burn These Hedge Funds?

“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Littelfuse, Inc. (NASDAQ:LFUS) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Littelfuse, Inc. (NASDAQ:LFUS) was in 22 hedge funds’ portfolios at the end of the third quarter of 2018. LFUS has seen an increase in support from the world’s most elite money managers recently. There were 20 hedge funds in our database with LFUS positions at the end of the previous quarter. Our calculations also showed that LFUS isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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.

Ken Fisher FISHER ASSET MANAGEMENT

Let’s take a look at the recent hedge fund action encompassing Littelfuse, Inc. (NASDAQ:LFUS).

How have hedgies been trading Littelfuse, Inc. (NASDAQ:LFUS)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LFUS over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

LFUS_dec2018

More specifically, Fisher Asset Management was the largest shareholder of Littelfuse, Inc. (NASDAQ:LFUS), with a stake worth $106 million reported as of the end of September. Trailing Fisher Asset Management was Ariel Investments, which amassed a stake valued at $46.3 million. Millennium Management, Giverny Capital, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, specific money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, created the most valuable position in Littelfuse, Inc. (NASDAQ:LFUS). Renaissance Technologies had $17.4 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $1.1 million position during the quarter. The other funds with brand new LFUS positions are Alec Litowitz and Ross Laser’s Magnetar Capital and George Hall’s Clinton Group.

Let’s go over hedge fund activity in other stocks similar to Littelfuse, Inc. (NASDAQ:LFUS). These stocks are Sterling Bancorp (NYSE:STL), Texas Roadhouse Inc (NASDAQ:TXRH), Insperity Inc (NYSE:NSP), and Blackbaud, Inc. (NASDAQ:BLKB). This group of stocks’ market valuations match LFUS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STL 21 396932 1
TXRH 19 77259 3
NSP 16 326578 -5
BLKB 13 301993 -1
Average 17.25 275691 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $276 million. That figure was $258 million in LFUS’s case. Sterling Bancorp (NYSE:STL) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Littelfuse, Inc. (NASDAQ:LFUS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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