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In this article we will analyze whether Floor & Decor Holdings, Inc. (NYSE:FND) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Floor & Decor Holdings, Inc. (NYSE:FND) a buy right now? The smart money was taking a pessimistic view. The number of bullish hedge fund positions went down by 10 recently. Floor & Decor Holdings, Inc. (NYSE:FND) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 44. Our calculations also showed that FND isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
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Do Hedge Funds Think FND Is A Good Stock To Buy Now?
At second quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the first quarter of 2020. On the other hand, there were a total of 44 hedge funds with a bullish position in FND a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Colin Moran's Abdiel Capital Advisors has the largest position in Floor & Decor Holdings, Inc. (NYSE:FND), worth close to $526.8 million, amounting to 15.2% of its total 13F portfolio. On Abdiel Capital Advisors's heels is Two Creeks Capital Management, managed by Ryan Pedlow, which holds a $237.1 million position; the fund has 13.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass Lee Hicks and Jan Koerner's Park Presidio Capital, D. E. Shaw's D E Shaw and Amir Mokari's Emerson Point Capital. In terms of the portfolio weights assigned to each position Abdiel Capital Advisors allocated the biggest weight to Floor & Decor Holdings, Inc. (NYSE:FND), around 15.19% of its 13F portfolio. Two Creeks Capital Management is also relatively very bullish on the stock, earmarking 13.49 percent of its 13F equity portfolio to FND.
Seeing as Floor & Decor Holdings, Inc. (NYSE:FND) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers that decided to sell off their entire stakes in the second quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $31.6 million in stock. Richard Scott Greeder's fund, Broad Bay Capital, also cut its stock, about $18.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 10 funds in the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Floor & Decor Holdings, Inc. (NYSE:FND) but similarly valued. These stocks are Watsco Inc (NYSE:WSO), Virgin Galactic Holdings, Inc. (NYSE:SPCE), Bunge Limited (NYSE:BG), Qiagen NV (NASDAQ:QGEN), Morningstar, Inc. (NASDAQ:MORN), CF Industries Holdings, Inc. (NYSE:CF), and Intellia Therapeutics, Inc. (NASDAQ:NTLA). This group of stocks' market caps are similar to FND's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSO,26,306144,4 SPCE,18,181423,1 BG,40,399239,-4 QGEN,22,482750,-5 MORN,24,1459482,-1 CF,47,955523,3 NTLA,41,2282192,12 Average,31.1,866679,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $867 million. That figure was $1164 million in FND's case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Virgin Galactic Holdings, Inc. (NYSE:SPCE) is the least popular one with only 18 bullish hedge fund positions. Floor & Decor Holdings, Inc. (NYSE:FND) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FND is 31.3. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on FND as the stock returned 15.6% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.