In this article we will check out the progression of hedge fund sentiment towards Flexsteel Industries, Inc. (NASDAQ:FLXS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Flexsteel Industries, Inc. (NASDAQ:FLXS) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare FLXS to other stocks including Geospace Technologies Corp (NASDAQ:GEOS), Townsquare Media Inc (NYSE:TSQ), and HMN Financial, Inc. (NASDAQ:HMNF) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_738761" align="aligncenter" width="400"] Fred DiSanto of Ancora Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to view the recent hedge fund action regarding Flexsteel Industries, Inc. (NASDAQ:FLXS).
What have hedge funds been doing with Flexsteel Industries, Inc. (NASDAQ:FLXS)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in FLXS a year ago. So, let's review 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, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Flexsteel Industries, Inc. (NASDAQ:FLXS). Royce & Associates has a $10.2 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates's heels is Renaissance Technologies, holding a $2.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Ali Motamed's Invenomic Capital Management, Frederick DiSanto's Ancora Advisors and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Flexsteel Industries, Inc. (NASDAQ:FLXS), around 0.73% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to FLXS.
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 first 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 review hedge fund activity in other stocks - not necessarily in the same industry as Flexsteel Industries, Inc. (NASDAQ:FLXS) but similarly valued. These stocks are Geospace Technologies Corp (NASDAQ:GEOS), Townsquare Media Inc (NYSE:TSQ), HMN Financial, Inc. (NASDAQ:HMNF), and China Customer Relations Centers, Inc. (NASDAQ:CCRC). All of these stocks' market caps match FLXS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GEOS,4,3823,-3 TSQ,7,19176,-2 HMNF,4,22411,0 CCRC,1,110,-1 Average,4,11380,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $15 million in FLXS's case. Townsquare Media Inc (NYSE:TSQ) is the most popular stock in this table. On the other hand China Customer Relations Centers, Inc. (NASDAQ:CCRC) is the least popular one with only 1 bullish hedge fund positions. Flexsteel Industries, Inc. (NASDAQ:FLXS) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately FLXS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FLXS were disappointed as the stock returned 10.4% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.