Resideo Technologies, Inc. (REZI): Hedge Fund Sentiment Unchanged

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Resideo Technologies, Inc. (NYSE:REZI).

Hedge fund interest in Resideo Technologies, Inc. (NYSE:REZI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that REZI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 Enact Holdings Inc. (NASDAQ:ACT), Macquarie Infrastructure Holdings, LLC (NYSE:MIC), and Academy Sports and Outdoors, Inc. (NASDAQ:ASO) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the key hedge fund action encompassing Resideo Technologies, Inc. (NYSE:REZI).

Do Hedge Funds Think REZI Is A Good Stock To Buy Now?

At the end of September, a total of 28 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 REZI over the last 25 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

The largest stake in Resideo Technologies, Inc. (NYSE:REZI) was held by Praesidium Investment Management Company, which reported holding $182.5 million worth of stock at the end of September. It was followed by Freshford Capital Management with a $53.6 million position. Other investors bullish on the company included Ariel Investments, Iridian Asset Management, and Greenlight Capital. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to Resideo Technologies, Inc. (NYSE:REZI), around 10.11% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, designating 7.64 percent of its 13F equity portfolio to REZI.

Because Resideo Technologies, Inc. (NYSE:REZI) has experienced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of money managers that slashed their full holdings last quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.6 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $0.8 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 take a look at hedge fund activity in other stocks – not necessarily in the same industry as Resideo Technologies, Inc. (NYSE:REZI) but similarly valued. We will take a look at Enact Holdings Inc. (NASDAQ:ACT), Macquarie Infrastructure Holdings, LLC (NYSE:MIC), Academy Sports and Outdoors, Inc. (NASDAQ:ASO), Onto Innovation Inc. (NYSE:ONTO), The Macerich Company (NYSE:MAC), Dillard’s, Inc. (NYSE:DDS), and Lexington Realty Trust (NYSE:LXP). This group of stocks’ market values match REZI’s market value.

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As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $381 million. That figure was $526 million in REZI’s case. Academy Sports and Outdoors, Inc. (NASDAQ:ASO) is the most popular stock in this table. On the other hand The Macerich Company (NYSE:MAC) is the least popular one with only 10 bullish hedge fund positions. Resideo Technologies, Inc. (NYSE:REZI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for REZI is 52.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately REZI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on REZI were disappointed as the stock returned 4.8% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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