The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Comfort Systems USA, Inc. (NYSE:FIX) and determine whether the smart money was really smart about this stock.
Is Comfort Systems USA, Inc. (NYSE:FIX) a great investment now? Prominent investors were becoming hopeful. The number of long hedge fund positions moved up by 2 in recent months. Comfort Systems USA, Inc. (NYSE:FIX) was in 22 hedge funds' portfolios at the end of June. The all time high for this statistics is 28. Our calculations also showed that FIX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Now let's take a glance at the recent hedge fund action regarding Comfort Systems USA, Inc. (NYSE:FIX).
How are hedge funds trading Comfort Systems USA, Inc. (NYSE:FIX)?
At Q2's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the first quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in FIX a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Comfort Systems USA, Inc. (NYSE:FIX) was held by Royce & Associates, which reported holding $18.2 million worth of stock at the end of September. It was followed by Paradice Investment Management with a $10.1 million position. Other investors bullish on the company included Citadel Investment Group, Third Avenue Management, and Impax Asset Management. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Comfort Systems USA, Inc. (NYSE:FIX), around 1.08% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 0.82 percent of its 13F equity portfolio to FIX.
Consequently, some big names have been driving this bullishness. Paradice Investment Management, managed by David Paradice, created the biggest position in Comfort Systems USA, Inc. (NYSE:FIX). Paradice Investment Management had $10.1 million invested in the company at the end of the quarter. Steven Baughman's Divisar Capital also made a $3.7 million investment in the stock during the quarter. The other funds with brand new FIX positions are Michael Gelband's ExodusPoint Capital, Hoon Kim's Quantinno Capital, and Mika Toikka's AlphaCrest Capital Management.
Let's go over hedge fund activity in other stocks similar to Comfort Systems USA, Inc. (NYSE:FIX). We will take a look at Mueller Water Products, Inc. (NYSE:MWA), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Zuora, Inc. (NYSE:ZUO), LTC Properties Inc (NYSE:LTC), Turquoise Hill Resources Ltd (NYSE:TRQ), Super Micro Computer, Inc. (NASDAQ:SMCI), and Boise Cascade Co (NYSE:BCC). This group of stocks' market values match FIX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MWA,21,197650,1 SBGI,24,258240,-1 ZUO,21,104127,-2 LTC,15,18655,4 TRQ,13,268820,-1 SMCI,22,422478,-2 BCC,13,42926,-5 Average,18.4,187557,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $80 million in FIX's case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Turquoise Hill Resources Ltd (NYSE:TRQ) is the least popular one with only 13 bullish hedge fund positions. Comfort Systems USA, Inc. (NYSE:FIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FIX is 71.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on FIX as the stock returned 26.6% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.