Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Fox Factory Holding Corp (NASDAQ:FOXF) changed recently.
Fox Factory Holding Corp (NASDAQ:FOXF) investors should be aware of an increase in activity from the world's largest hedge funds recently. FOXF was in 14 hedge funds' portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with FOXF holdings at the end of the previous quarter. Our calculations also showed that FOXF isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the key hedge fund action regarding Fox Factory Holding Corp (NASDAQ:FOXF).
Hedge fund activity in Fox Factory Holding Corp (NASDAQ:FOXF)
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FOXF over the last 15 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the biggest position in Fox Factory Holding Corp (NASDAQ:FOXF). Renaissance Technologies has a $16 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies's heels is Driehaus Capital, led by Richard Driehaus, holding a $6.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Chuck Royce's Royce & Associates, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Noam Gottesman's GLG Partners.
Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Fox Factory Holding Corp (NASDAQ:FOXF). Arrowstreet Capital had $4 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $1 million investment in the stock during the quarter. The other funds with brand new FOXF positions are Dmitry Balyasny's Balyasny Asset Management, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital, and Robert B. Gillam's McKinley Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Fox Factory Holding Corp (NASDAQ:FOXF) but similarly valued. These stocks are International Game Technology PLC (NYSE:IGT), Union Bankshares Corporation (NASDAQ:UBSH), Nu Skin Enterprises, Inc. (NYSE:NUS), and Avis Budget Group Inc. (NASDAQ:CAR). This group of stocks' market caps are similar to FOXF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IGT,32,395322,-2 UBSH,7,28413,1 NUS,23,205294,-1 CAR,28,1063531,-1 Average,22.5,423140,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $423 million. That figure was $39 million in FOXF's case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand Union Bankshares Corporation (NASDAQ:UBSH) is the least popular one with only 7 bullish hedge fund positions. Fox Factory Holding Corp (NASDAQ:FOXF) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on FOXF as the stock returned 10.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.