Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Littelfuse, Inc. (NASDAQ:LFUS) was in 15 hedge funds' portfolios at the end of June. LFUS has experienced an increase in hedge fund interest of late. There were 13 hedge funds in our database with LFUS holdings at the end of the previous quarter. Our calculations also showed that LFUS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's analyze the latest hedge fund action surrounding Littelfuse, Inc. (NASDAQ:LFUS).
What does smart money think about Littelfuse, Inc. (NASDAQ:LFUS)?
At Q2's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LFUS over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Littelfuse, Inc. (NASDAQ:LFUS), which was worth $93 million at the end of the second quarter. On the second spot was Ariel Investments which amassed $78.3 million worth of shares. Moreover, Impax Asset Management, Giverny Capital, and GAMCO Investors were also bullish on Littelfuse, Inc. (NASDAQ:LFUS), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have been driving this bullishness. AQR Capital Management, managed by Cliff Asness, established the biggest position in Littelfuse, Inc. (NASDAQ:LFUS). AQR Capital Management had $1.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $1.4 million position during the quarter. The only other fund with a new position in the stock is Claes Fornell's CSat Investment Advisory.
Let's check out hedge fund activity in other stocks similar to Littelfuse, Inc. (NASDAQ:LFUS). These stocks are Assured Guaranty Ltd. (NYSE:AGO), Marriott Vacations Worldwide Corporation (NYSE:VAC), Sterling Bancorp (NYSE:STL), and nVent Electric plc (NYSE:NVT). All of these stocks' market caps match LFUS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGO,36,613916,2 VAC,27,442811,1 STL,21,472824,2 NVT,28,776298,3 Average,28,576462,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $268 million in LFUS's case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand Sterling Bancorp (NYSE:STL) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Littelfuse, Inc. (NASDAQ:LFUS) is even less popular than STL. Hedge funds dodged a bullet by taking a bearish stance towards LFUS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LFUS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LFUS investors were disappointed as the stock returned 0.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.