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Is FleetCor Technologies, Inc. (FLT) Going to Burn These Hedge Funds?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like FleetCor Technologies, Inc. (NYSE:FLT).

FleetCor Technologies, Inc. (NYSE:FLT) was in 42 hedge funds' portfolios at the end of September. FLT shareholders have witnessed an increase in hedge fund sentiment lately. There were 40 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 Q3 rankings, see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26088" align="aligncenter" width="508"] Chase Coleman of Tiger Global[/caption]

Chase Coleman of Tiger Global

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action surrounding FleetCor Technologies, Inc. (NYSE:FLT).

What have hedge funds been doing with FleetCor Technologies, Inc. (NYSE:FLT)?

At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FLT 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.

No of Hedge Funds with FLT Positions

More specifically, Tiger Global Management was the largest shareholder of FleetCor Technologies, Inc. (NYSE:FLT), with a stake worth $495.3 million reported as of the end of September. Trailing Tiger Global Management was Steadfast Capital Management, which amassed a stake valued at $309.4 million. Melvin Capital Management, Arrowstreet Capital, 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 Atalan Capital allocated the biggest weight to FleetCor Technologies, Inc. (NYSE:FLT), around 11.34% of its portfolio. Crestwood Capital Management is also relatively very bullish on the stock, earmarking 8.87 percent of its 13F equity portfolio to FLT.

As aggregate interest increased, specific money managers were leading the bulls' herd. Melvin Capital Management, managed by Gabriel Plotkin, initiated the largest position in FleetCor Technologies, Inc. (NYSE:FLT). Melvin Capital Management had $257.3 million invested in the company at the end of the quarter. Gabriel Plotkin's Melvin Capital Management also made a $74.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Lee Ainslie's Maverick Capital, Jacob Doft's Highline Capital Management, and Philippe Laffont's Coatue Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as FleetCor Technologies, Inc. (NYSE:FLT) but similarly valued. These stocks are Realty Income Corporation (NYSE:O), DTE Energy Company (NYSE:DTE), Waste Connections, Inc. (NYSE:WCN), and PACCAR Inc (NASDAQ:PCAR). This group of stocks' market values resemble FLT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position O,16,177826,-6 DTE,20,678909,-8 WCN,29,575449,3 PCAR,25,193757,-2 Average,22.5,406485,-3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $2138 million in FLT's case. Waste Connections, Inc. (NYSE:WCN) is the most popular stock in this table. On the other hand Realty Income Corporation (NYSE:O) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks FleetCor Technologies, Inc. (NYSE:FLT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately FLT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FLT were disappointed as the stock returned 2.9% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.

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

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