Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to HEICO Corporation (NYSE:HEI) changed recently.
HEICO Corporation (NYSE:HEI) investors should be aware of an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that HEI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
To most stock holders, hedge funds are viewed as unimportant, outdated financial tools of the past. While there are more than 8000 funds trading at present, Our researchers look at the aristocrats of this group, around 750 funds. These hedge fund managers manage bulk of the hedge fund industry's total asset base, and by tracking their unrivaled stock picks, Insider Monkey has formulated numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's take a peek at the recent hedge fund action encompassing HEICO Corporation (NYSE:HEI).
Hedge fund activity in HEICO Corporation (NYSE:HEI)
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HEI over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the largest position in HEICO Corporation (NYSE:HEI). Renaissance Technologies has a $176 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, managed by Ken Fisher, which holds a $175.2 million position; 0.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include Chuck Royce's Royce & Associates, Robert Joseph Caruso's Select Equity Group and Richard Chilton's Chilton Investment Company. In terms of the portfolio weights assigned to each position Fort Baker Capital Management allocated the biggest weight to HEICO Corporation (NYSE:HEI), around 7.98% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, earmarking 4.71 percent of its 13F equity portfolio to HEI.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Whitebox Advisors, managed by Andy Redleaf, created the biggest position in HEICO Corporation (NYSE:HEI). Whitebox Advisors had $25.2 million invested in the company at the end of the quarter. Clint Carlson's Carlson Capital also made a $23.8 million investment in the stock during the quarter. The following funds were also among the new HEI investors: Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Renaissance Technologies, and Steve Pigott's Fort Baker Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to HEICO Corporation (NYSE:HEI). These stocks are ZTO Express (Cayman) Inc. (NYSE:ZTO), Check Point Software Technologies Ltd. (NASDAQ:CHKP), Arthur J. Gallagher & Co. (NYSE:AJG), and Magna International Inc. (NYSE:MGA). This group of stocks' market values match HEI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZTO,19,505301,4 CHKP,20,407935,-4 AJG,23,286963,-2 MGA,17,432332,3 Average,19.75,408133,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $408 million. That figure was $1149 million in HEI's case. Arthur J. Gallagher & Co. (NYSE:AJG) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks HEICO Corporation (NYSE:HEI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on HEI as the stock returned 50.6% so far in 2019 (through 12/23) 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.