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In this article we will check out the progression of hedge fund sentiment towards Fortis Inc. (NYSE:FTS) 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.
Fortis Inc. (NYSE:FTS) has experienced an increase in support from the world's most elite money managers in recent months. Our calculations also showed that FTS isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Stuart Zimmer of Zimmer Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the fresh hedge fund action regarding Fortis Inc. (NYSE:FTS).
What does smart money think about Fortis Inc. (NYSE:FTS)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in FTS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Fortis Inc. (NYSE:FTS), which was worth $186.1 million at the end of the third quarter. On the second spot was GQG Partners which amassed $83.5 million worth of shares. Zimmer Partners, Arrowstreet Capital, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Fortis Inc. (NYSE:FTS), around 5.18% of its 13F portfolio. GQG Partners is also relatively very bullish on the stock, designating 0.57 percent of its 13F equity portfolio to FTS.
Now, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Fortis Inc. (NYSE:FTS). Arrowstreet Capital had $12.6 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $7.4 million investment in the stock during the quarter. The other funds with brand new FTS positions are Israel Englander's Millennium Management, Michael Gelband's ExodusPoint Capital, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's go over hedge fund activity in other stocks similar to Fortis Inc. (NYSE:FTS). These stocks are Wipro Limited (NYSE:WIT), Corteva, Inc. (NYSE:CTVA), Rockwell Automation Inc. (NYSE:ROK), and Fortinet Inc (NASDAQ:FTNT). This group of stocks' market caps are closest to FTS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WIT,7,56972,-5 CTVA,36,509655,9 ROK,37,335488,-2 FTNT,29,1465283,-13 Average,27.25,591850,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $592 million. That figure was $347 million in FTS's case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 7 bullish hedge fund positions. Fortis Inc. (NYSE:FTS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately FTS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FTS investors were disappointed as the stock returned -1.3% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.