The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Fortis Inc. (NYSE:FTS) based on those filings.
Is Fortis Inc. (NYSE:FTS) a splendid investment now? The smart money is in a bearish mood. The number of long hedge fund positions were cut by 1 recently. Our calculations also showed that FTS isn't among the 30 most popular stocks among hedge funds (view 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 some fund managers who are betting on Dow reaching 40000 in a year, 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. We're going to check out the key hedge fund action regarding Fortis Inc. (NYSE:FTS).
What have hedge funds been doing with Fortis Inc. (NYSE:FTS)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the first quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in FTS a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Fortis Inc. (NYSE:FTS) was held by Renaissance Technologies, which reported holding $118.2 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $75.1 million position. Other investors bullish on the company included GLG Partners, D E Shaw, and Point72 Asset Management.
Since Fortis Inc. (NYSE:FTS) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of hedge funds who were dropping their positions entirely heading into Q3. At the top of the heap, Cliff Asness's AQR Capital Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $22.1 million in stock. Peter J. Hark's fund, Shelter Harbor Advisors, also sold off its stock, about $4.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Fortis Inc. (NYSE:FTS) but similarly valued. These stocks are The Kroger Co. (NYSE:KR), Keysight Technologies Inc (NYSE:KEYS), Alexandria Real Estate Equities Inc (NYSE:ARE), and Yum China Holdings, Inc. (NYSE:YUMC). This group of stocks' market values match FTS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KR,28,404426,6 KEYS,39,855014,2 ARE,27,484902,10 YUMC,28,448229,-2 Average,30.5,548143,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $548 million. That figure was $256 million in FTS's case. Keysight Technologies Inc (NYSE:KEYS) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Fortis Inc. (NYSE:FTS) is even less popular than ARE. Hedge funds clearly dropped the ball on FTS as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FTS as the stock returned 8.4% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.