Were Hedge Funds Right About Piling Into FleetCor Technologies, Inc. (FLT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of FleetCor Technologies, Inc. (NYSE:FLT) based on that data and determine whether they were really smart about the stock.

FleetCor Technologies, Inc. (NYSE:FLT) investors should pay attention to an increase in hedge fund sentiment recently. FLT was in 51 hedge funds’ portfolios at the end of March. There were 44 hedge funds in our database with FLT holdings at the end of the previous quarter. Our calculations also showed that FLT 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the key hedge fund action regarding FleetCor Technologies, Inc. (NYSE:FLT).

How are hedge funds trading FleetCor Technologies, Inc. (NYSE:FLT)?

Heading into the second quarter of 2020, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FLT over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FLT A Good Stock To Buy?

Among these funds, Melvin Capital Management held the most valuable stake in FleetCor Technologies, Inc. (NYSE:FLT), which was worth $278.1 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $241.6 million worth of shares. Maverick Capital, Steadfast Capital Management, and Palestra Capital Management 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 Berylson Capital Partners allocated the biggest weight to FleetCor Technologies, Inc. (NYSE:FLT), around 13.67% of its 13F portfolio. Banbury Partners is also relatively very bullish on the stock, dishing out 10.9 percent of its 13F equity portfolio to FLT.

Consequently, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in FleetCor Technologies, Inc. (NYSE:FLT). Citadel Investment Group had $46.9 million invested in the company at the end of the quarter. Jeffrey Tannenbaum’s Fir Tree also initiated a $45 million position during the quarter. The following funds were also among the new FLT investors: John Smith Clark’s Southpoint Capital Advisors, Jonathan Auerbach’s Hound Partners, and Baker Burleson and Stormy Scott’s Banbury Partners.

Let’s now review hedge fund activity in other stocks similar to FleetCor Technologies, Inc. (NYSE:FLT). We will take a look at Incyte Corporation (NASDAQ:INCY), Northern Trust Corporation (NASDAQ:NTRS), Church & Dwight Co., Inc. (NYSE:CHD), and Smith & Nephew plc (NYSE:SNN). This group of stocks’ market values are similar to FLT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INCY 40 3325488 -6
NTRS 27 330348 -8
CHD 36 506943 -1
SNN 9 89054 6
Average 28 1062958 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1063 million. That figure was $1655 million in FLT’s case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks FleetCor Technologies, Inc. (NYSE:FLT) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on FLT as the stock returned 34.8% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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