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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding First Solar, Inc. (NASDAQ:FSLR).
Is FSLR stock a buy? The best stock pickers were getting less bullish. The number of bullish hedge fund positions decreased by 6 lately. First Solar, Inc. (NASDAQ:FSLR) was in 34 hedge funds' portfolios at the end of December. The all time high for this statistic is 40. Our calculations also showed that FSLR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Stanley Druckenmiller of Duquesne Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Now we're going to take a peek at the new hedge fund action encompassing First Solar, Inc. (NASDAQ:FSLR).
Do Hedge Funds Think FSLR Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FSLR over the last 22 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Polunin Capital was the largest shareholder of First Solar, Inc. (NASDAQ:FSLR), with a stake worth $87.7 million reported as of the end of December. Trailing Polunin Capital was Antipodes Partners, which amassed a stake valued at $45 million. Citadel Investment Group, AQR Capital Management, and PEAK6 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 Polunin Capital allocated the biggest weight to First Solar, Inc. (NASDAQ:FSLR), around 34.23% of its 13F portfolio. Antipodes Partners is also relatively very bullish on the stock, earmarking 1.96 percent of its 13F equity portfolio to FSLR.
Because First Solar, Inc. (NASDAQ:FSLR) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of hedgies who sold off their full holdings in the fourth quarter. Interestingly, Suzi Nutton (CEO)'s Lansdowne Partners dumped the largest stake of the 750 funds watched by Insider Monkey, comprising an estimated $59 million in stock. Anand Parekh's fund, Alyeska Investment Group, also dropped its stock, about $11.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 6 funds in the fourth quarter.
Let's also examine hedge fund activity in other stocks similar to First Solar, Inc. (NASDAQ:FSLR). These stocks are Bright Horizons Family Solutions Inc (NYSE:BFAM), Westlake Chemical Corporation (NYSE:WLK), L Brands Inc (NYSE:LB), Host Hotels and Resorts Inc (NASDAQ:HST), Banco de Chile (NYSE:BCH), ICON Public Limited Company (NASDAQ:ICLR), and China Eastern Airlines Corp. Ltd. (NYSE:CEA). All of these stocks' market caps match FSLR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BFAM,20,308229,-6 WLK,22,158454,-4 LB,52,3908521,7 HST,22,127294,1 BCH,3,48096,-1 ICLR,29,646187,5 CEA,1,1005,1 Average,21.3,742541,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $743 million. That figure was $406 million in FSLR's case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. First Solar, Inc. (NASDAQ:FSLR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FSLR is 56.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately FSLR wasn't nearly as popular as these 30 stocks and hedge funds that were betting on FSLR were disappointed as the stock returned -12.9% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.