Is Frequency Electronics, Inc. (FEIM) A Good Stock To Buy?
Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Frequency Electronics, Inc. (NASDAQ:FEIM).
Frequency Electronics, Inc. (NASDAQ:FEIM) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare FEIM to other stocks including Harvard Bioscience, Inc. (NASDAQ:HBIO), RADCOM Ltd. (NASDAQ:RDCM), and Applied Genetic Technologies Corp (NASDAQ:AGTC) to get a better sense of its popularity.
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To most traders, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are over 8000 funds trading at the moment, Our experts hone in on the aristocrats of this group, about 850 funds. Most estimates calculate that this group of people administer the lion's share of all hedge funds' total asset base, and by watching their top picks, Insider Monkey has unsheathed many investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_699750" align="aligncenter" width="397"]
Gifford Combs of Dalton Investments[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the recent hedge fund action surrounding Frequency Electronics, Inc. (NASDAQ:FEIM).
How are hedge funds trading Frequency Electronics, Inc. (NASDAQ:FEIM)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 3 hedge funds with a bullish position in FEIM a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Frequency Electronics, Inc. (NASDAQ:FEIM). Royce & Associates has a $6.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $2.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Frequency Electronics, Inc. (NASDAQ:FEIM), around 0.09% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to FEIM.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Frequency Electronics, Inc. (NASDAQ:FEIM) but similarly valued. These stocks are Harvard Bioscience, Inc. (NASDAQ:HBIO), RADCOM Ltd. (NASDAQ:RDCM), Applied Genetic Technologies Corp (NASDAQ:AGTC), and AgroFresh Solutions Inc (NASDAQ:AGFS). This group of stocks' market caps resemble FEIM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HBIO,11,22612,-3 RDCM,4,9385,-1 AGTC,12,22216,5 AGFS,4,926,-2 Average,7.75,13785,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $9 million in FEIM's case. Applied Genetic Technologies Corp (NASDAQ:AGTC) is the most popular stock in this table. On the other hand RADCOM Ltd. (NASDAQ:RDCM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Frequency Electronics, Inc. (NASDAQ:FEIM) is even less popular than RDCM. Hedge funds dodged a bullet by taking a bearish stance towards FEIM. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately FEIM wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FEIM investors were disappointed as the stock returned -11.4% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
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