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We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Flexsteel Industries, Inc. (NASDAQ:FLXS).
Is Flexsteel Industries, Inc. (NASDAQ:FLXS) the right investment to pursue these days? The smart money is taking an optimistic view. The number of bullish hedge fund bets inched up by 1 in recent months. Our calculations also showed that FLXS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most stock holders, hedge funds are seen as worthless, old investment tools of yesteryear. While there are greater than 8000 funds in operation today, Our experts choose to focus on the crème de la crème of this club, around 750 funds. It is estimated that this group of investors orchestrate the lion's share of the hedge fund industry's total asset base, and by observing their top stock picks, Insider Monkey has found a few investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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David Harding of Winton Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's take a look at the new hedge fund action regarding Flexsteel Industries, Inc. (NASDAQ:FLXS).
How have hedgies been trading Flexsteel Industries, Inc. (NASDAQ:FLXS)?
At Q3's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in FLXS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce's Royce & Associates has the biggest position in Flexsteel Industries, Inc. (NASDAQ:FLXS), worth close to $14.6 million, corresponding to 0.1% of its total 13F portfolio. On Royce & Associates's heels is Renaissance Technologies, founded by Jim Simons, holding a $3.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Frederick DiSanto's Ancora Advisors, John Overdeck and David Siegel's Two Sigma Advisors and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Flexsteel Industries, Inc. (NASDAQ:FLXS), around 0.14% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to FLXS.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, initiated the biggest position in Flexsteel Industries, Inc. (NASDAQ:FLXS). Winton Capital Management had $0.3 million invested in the company at the end of the quarter. David E. Shaw's D E Shaw also initiated a $0.2 million position during the quarter.
Let's also examine hedge fund activity in other stocks similar to Flexsteel Industries, Inc. (NASDAQ:FLXS). We will take a look at Aptinyx Inc. (NASDAQ:APTX), Smart Sand, Inc. (NASDAQ:SND), Harvard Bioscience, Inc. (NASDAQ:HBIO), and Aptose Biosciences Inc (NASDAQ:APTO). This group of stocks' market valuations match FLXS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APTX,8,15552,0 SND,10,5533,3 HBIO,13,26821,2 APTO,7,19612,1 Average,9.5,16880,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $19 million in FLXS's case. Harvard Bioscience, Inc. (NASDAQ:HBIO) is the most popular stock in this table. On the other hand Aptose Biosciences Inc (NASDAQ:APTO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Flexsteel Industries, Inc. (NASDAQ:FLXS) is even less popular than APTO. Hedge funds clearly dropped the ball on FLXS as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on FLXS as the stock returned 24% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.