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In this article we will take a look at whether hedge funds think Flowserve Corporation (NYSE:FLS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is FLS a good stock to buy? Money managers were betting on the stock. The number of bullish hedge fund positions advanced by 8 recently. Flowserve Corporation (NYSE:FLS) was in 29 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that FLS isn't among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's check out the latest hedge fund action encompassing Flowserve Corporation (NYSE:FLS).
Do Hedge Funds Think FLS Is A Good Stock To Buy Now?
At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FLS over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Flowserve Corporation (NYSE:FLS) was held by GAMCO Investors, which reported holding $62.6 million worth of stock at the end of December. It was followed by D E Shaw with a $28.2 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and AQR Capital Management. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Flowserve Corporation (NYSE:FLS), around 0.55% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, earmarking 0.34 percent of its 13F equity portfolio to FLS.
As industrywide interest jumped, specific money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in Flowserve Corporation (NYSE:FLS). Balyasny Asset Management had $3 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $2.4 million position during the quarter. The other funds with brand new FLS positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Michael Gelband's ExodusPoint Capital, and Donald Sussman's Paloma Partners.
Let's also examine hedge fund activity in other stocks similar to Flowserve Corporation (NYSE:FLS). These stocks are Cyberark Software Ltd (NASDAQ:CYBR), Valmont Industries, Inc. (NYSE:VMI), Exponent, Inc. (NASDAQ:EXPO), IDACORP Inc (NYSE:IDA), Amyris Inc (NASDAQ:AMRS), RLI Corp. (NYSE:RLI), and Flowers Foods, Inc. (NYSE:FLO). This group of stocks' market values resemble FLS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CYBR,32,502899,5 VMI,23,401266,-3 EXPO,17,63144,2 IDA,17,174429,3 AMRS,14,641287,-1 RLI,14,189969,-1 FLO,26,301870,-1 Average,20.4,324981,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $174 million in FLS's case. Cyberark Software Ltd (NASDAQ:CYBR) is the most popular stock in this table. On the other hand Amyris Inc (NASDAQ:AMRS) is the least popular one with only 14 bullish hedge fund positions. Flowserve Corporation (NYSE:FLS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLS is 78.9. 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. 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 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately FLS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FLS were disappointed as the stock returned 4.4% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.