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Is TechnipFMC plc (FTI) Burn These Hedge Funds?

Does TechnipFMC plc (NYSE:FTI) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Hedge fund interest in TechnipFMC plc (NYSE:FTI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FTI to other stocks including Fidelity National Financial Inc (NYSE:FNF), FactSet Research Systems Inc. (NYSE:FDS), and Tiffany & Co. (NYSE:TIF) to get a better sense of its popularity. Our calculations also showed that FTI isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Kerr Neilson

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the fresh hedge fund action surrounding TechnipFMC plc (NYSE:FTI).

Hedge fund activity in TechnipFMC plc (NYSE:FTI)

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. By comparison, 26 hedge funds held shares or bullish call options in FTI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FTI_oct2019

More specifically, Platinum Asset Management was the largest shareholder of TechnipFMC plc (NYSE:FTI), with a stake worth $235.3 million reported as of the end of March. Trailing Platinum Asset Management was Pzena Investment Management, which amassed a stake valued at $229 million. Millennium Management, Luminus Management, and Fisher Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that TechnipFMC plc (NYSE:FTI) has experienced a decline in interest from the smart money, logic holds that there was a specific group of funds that elected to cut their entire stakes in the second quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management sold off the biggest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $63.9 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund sold off about $24 million worth. These transactions are important to note, 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 TechnipFMC plc (NYSE:FTI) but similarly valued. We will take a look at Fidelity National Financial Inc (NYSE:FNF), FactSet Research Systems Inc. (NYSE:FDS), Tiffany & Co. (NYSE:TIF), and Sarepta Therapeutics Inc (NASDAQ:SRPT). All of these stocks’ market caps are similar to FTI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNF 29 326008 -1
FDS 19 345992 1
TIF 22 1455290 -8
SRPT 48 1466822 4
Average 29.5 898528 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $899 million. That figure was $863 million in FTI’s case. Sarepta Therapeutics Inc (NASDAQ:SRPT) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 19 bullish hedge fund positions. TechnipFMC plc (NYSE:FTI) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FTI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FTI investors were disappointed as the stock returned -6.4% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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