World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Franklin Electric Co., Inc. (NASDAQ:FELE) has seen a decrease in support from the world's most elite money managers of late. Our calculations also showed that FELE isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 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 glance at the recent hedge fund action regarding Franklin Electric Co., Inc. (NASDAQ:FELE).
How are hedge funds trading Franklin Electric Co., Inc. (NASDAQ:FELE)?
At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards FELE over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Impax Asset Management was the largest shareholder of Franklin Electric Co., Inc. (NASDAQ:FELE), with a stake worth $123.1 million reported as of the end of December. Trailing Impax Asset Management was Royce & Associates, which amassed a stake valued at $54.1 million. GAMCO Investors, Millennium Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Franklin Electric Co., Inc. (NASDAQ:FELE) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few funds who were dropping their full holdings in the third quarter. Interestingly, Brandon Haley's Holocene Advisors dumped the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $0.4 million in stock. Cliff Asness's fund, AQR Capital Management, also dropped its stock, about $0.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Franklin Electric Co., Inc. (NASDAQ:FELE) but similarly valued. These stocks are WesBanco, Inc. (NASDAQ:WSBC), EVO Payments, Inc. (NASDAQ:EVOP), Jack in the Box Inc. (NASDAQ:JACK), and Central Garden & Pet Co (NASDAQ:CENT). This group of stocks' market caps are similar to FELE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSBC,5,41667,-4 EVOP,10,46236,-4 JACK,29,624500,3 CENT,24,147833,4 Average,17,215059,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $201 million in FELE's case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand WesBanco, Inc. (NASDAQ:WSBC) is the least popular one with only 5 bullish hedge fund positions. Franklin Electric Co., Inc. (NASDAQ:FELE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on FELE, though not to the same extent, as the stock returned 19.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.