U.S. Markets open in 43 mins

Hedge Funds Have Never Been More Bullish On Keysight Technologies Inc (KEYS)

Nina Todic

Is Keysight Technologies Inc (NYSE:KEYS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Keysight Technologies Inc (NYSE:KEYS) investors should be aware of an increase in activity from the world's largest hedge funds lately. Our calculations also showed that KEYS 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]

Noam Gottesman GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the recent hedge fund action encompassing Keysight Technologies Inc (NYSE:KEYS).

What have hedge funds been doing with Keysight Technologies Inc (NYSE:KEYS)?

At Q3's end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KEYS over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KEYS Positions

Among these funds, Ariel Investments held the most valuable stake in Keysight Technologies Inc (NYSE:KEYS), which was worth $119 million at the end of the third quarter. On the second spot was GLG Partners which amassed $81.3 million worth of shares. Sirios Capital Management, Arrowstreet Capital, and Renaissance Technologies 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 Banbury Partners allocated the biggest weight to Keysight Technologies Inc (NYSE:KEYS), around 10.15% of its portfolio. Southport Management is also relatively very bullish on the stock, dishing out 7.66 percent of its 13F equity portfolio to KEYS.

As industrywide interest jumped, key money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, initiated the most valuable position in Keysight Technologies Inc (NYSE:KEYS). Alyeska Investment Group had $5.9 million invested in the company at the end of the quarter. Guy Shahar's DSAM Partners also made a $1.4 million investment in the stock during the quarter. The other funds with brand new KEYS positions are James Dondero's Highland Capital Management, Renee Yao's Neo Ivy Capital, and Larry Chen and Terry Zhang's Tairen Capital.

Let's go over hedge fund activity in other stocks similar to Keysight Technologies Inc (NYSE:KEYS). We will take a look at Restaurant Brands International Inc (NYSE:QSR), Best Buy Co., Inc. (NYSE:BBY), CMS Energy Corporation (NYSE:CMS), and Lennar Corporation (NYSE:LEN). This group of stocks' market values are closest to KEYS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QSR,55,4249554,16 BBY,27,628028,-4 CMS,26,942764,4 LEN,57,1988724,4 Average,41.25,1952268,5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.25 hedge funds with bullish positions and the average amount invested in these stocks was $1952 million. That figure was $1000 million in KEYS's case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand CMS Energy Corporation (NYSE:CMS) is the least popular one with only 26 bullish hedge fund positions. Keysight Technologies Inc (NYSE:KEYS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on KEYS, though not to the same extent, as the stock returned 6.6% during the fourth quarter (through 11/22) and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content