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TechnipFMC plc (FTI): Hedge Funds De-risking

In this article we will check out the progression of hedge fund sentiment towards TechnipFMC plc (NYSE:FTI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is TechnipFMC plc (NYSE:FTI) a buy, sell, or hold? Hedge funds are in a bearish mood. The number of bullish hedge fund positions were trimmed by 5 recently. Our calculations also showed that FTI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Kerr Neilson of Platinum Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the new hedge fund action surrounding TechnipFMC plc (NYSE:FTI).

What does smart money think about TechnipFMC plc (NYSE:FTI)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FTI over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in TechnipFMC plc (NYSE:FTI), which was worth $82.4 million at the end of the third quarter. On the second spot was Platinum Asset Management which amassed $64.5 million worth of shares. Antipodes Partners, D E Shaw, and Arrowstreet Capital 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 Atlantic Investment Management allocated the biggest weight to TechnipFMC plc (NYSE:FTI), around 6.69% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, earmarking 4.43 percent of its 13F equity portfolio to FTI.

Since TechnipFMC plc (NYSE:FTI) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest investment of the 750 funds watched by Insider Monkey, valued at an estimated $31.9 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also said goodbye to its stock, about $10.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TechnipFMC plc (NYSE:FTI) but similarly valued. These stocks are Ashland Global Holdings Inc.. (NYSE:ASH), NorthWestern Corporation (NYSE:NWE), Cameco Corporation (NYSE:CCJ), and Pan American Silver Corp. (NASDAQ:PAAS). This group of stocks’ market values are closest to FTI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ASH 32 677314 2
NWE 19 125827 0
CCJ 24 267635 -4
PAAS 30 341386 0
Average 26.25 353041 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $353 million. That figure was $395 million in FTI’s case. Ashland Global Holdings Inc.. (NYSE:ASH) is the most popular stock in this table. On the other hand NorthWestern Corporation (NYSE:NWE) is the least popular one with only 19 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately FTI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FTI were disappointed as the stock returned 9.8% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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