“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether 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 TechnipFMC plc (NYSE:FTI) in order to identify whether reputable and successful top money managers continue to believe in its potential.
TechnipFMC plc (NYSE:FTI) has experienced an increase in hedge fund interest in recent months. FTI was in 25 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with FTI holdings at the end of the previous quarter. Our calculations also showed that fti isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s go over the key hedge fund action surrounding TechnipFMC plc (NYSE:FTI).
How have hedgies been trading TechnipFMC plc (NYSE:FTI)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FTI over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Kerr Neilson’s Platinum Asset Management has the number one position in TechnipFMC plc (NYSE:FTI), worth close to $194 million, corresponding to 4.6% of its total 13F portfolio. Coming in second is Pzena Investment Management, managed by Richard S. Pzena, which holds a $117.1 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Jonathan Barrett and Paul Segal’s Luminus Management, Steve Cohen’s Point72 Asset Management and Israel Englander’s Millennium Management.
As one would reasonably expect, some big names were breaking ground themselves. Luminus Management, managed by Jonathan Barrett and Paul Segal, initiated the most valuable position in TechnipFMC plc (NYSE:FTI). Luminus Management had $73.8 million invested in the company at the end of the quarter. Till Bechtolsheimer’s Arosa Capital Management also made a $21.8 million investment in the stock during the quarter. The following funds were also among the new FTI investors: Louis Bacon’s Moore Global Investments, Alexander Mitchell’s Scopus Asset Management, and Sara Nainzadeh’s Centenus Global Management.
Let’s now review hedge fund activity in other stocks similar to TechnipFMC plc (NYSE:FTI). We will take a look at Ubiquiti Networks Inc (NASDAQ:UBNT), Lennox International Inc. (NYSE:LII), Eastman Chemical Company (NYSE:EMN), and The Mosaic Company (NYSE:MOS). This group of stocks’ market valuations match FTI’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 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $617 million in FTI’s case. Eastman Chemical Company (NYSE:EMN) is the most popular stock in this table. On the other hand Ubiquiti Networks Inc (NASDAQ:UBNT) is the least popular one with only 17 bullish hedge fund positions. TechnipFMC plc (NYSE:FTI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FTI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FTI were disappointed as the stock returned -8.2% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.