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 Fortive Corporation (NYSE:FTV) based on those filings.
Fortive Corporation (NYSE:FTV) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that FTV isn't among the 30 most popular stocks among hedge funds. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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 take a glance at the recent hedge fund action regarding Fortive Corporation (NYSE:FTV).
How have hedgies been trading Fortive Corporation (NYSE:FTV)?
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the first quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in FTV a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
[caption id="attachment_728376" align="aligncenter" width="473"] Jonathan Barrett of Luminus Management[/caption]
More specifically, Gates Capital Management was the largest shareholder of Fortive Corporation (NYSE:FTV), with a stake worth $68 million reported as of the end of March. Trailing Gates Capital Management was Select Equity Group, which amassed a stake valued at $48 million. Gotham Asset Management, Luminus Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Fortive Corporation (NYSE:FTV). Two Sigma Advisors had $18.1 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also initiated a $2 million position during the quarter. The following funds were also among the new FTV investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Michael Gelband's ExodusPoint Capital, and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Fortive Corporation (NYSE:FTV) but similarly valued. We will take a look at AutoZone, Inc. (NYSE:AZO), Barrick Gold Corporation (NYSE:GOLD), Sirius XM Holdings Inc (NASDAQ:SIRI), and Cummins Inc. (NYSE:CMI). This group of stocks' market caps are closest to FTV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AZO,37,1123000,-5 GOLD,39,1162700,2 SIRI,29,1238935,-3 CMI,45,1127412,3 Average,37.5,1163012,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1163 million. That figure was $362 million in FTV's case. Cummins Inc. (NYSE:CMI) is the most popular stock in this table. On the other hand Sirius XM Holdings Inc (NASDAQ:SIRI) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Fortive Corporation (NYSE:FTV) is even less popular than SIRI. Hedge funds dodged a bullet by taking a bearish stance towards FTV. 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 FTV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FTV investors were disappointed as the stock returned -15.8% 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.