Is TechnipFMC plc (NYSE:FTI) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
TechnipFMC plc (NYSE:FTI) was in 21 hedge funds' portfolios at the end of December. FTI investors should be aware of a decrease in enthusiasm from smart money in recent months. There were 23 hedge funds in our database with FTI holdings at the end of the previous quarter. Our calculations also showed that FTI isn't among the 30 most popular stocks among hedge funds.
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 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 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.
We're going to take a look at the key hedge fund action encompassing TechnipFMC plc (NYSE:FTI).
What have hedge funds been doing with TechnipFMC plc (NYSE:FTI)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in FTI a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Platinum Asset Management held the most valuable stake in TechnipFMC plc (NYSE:FTI), which was worth $161.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $77.1 million worth of shares. Moreover, Pzena Investment Management, Balyasny Asset Management, and Alyeska Investment Group were also bullish on TechnipFMC plc (NYSE:FTI), allocating a large percentage of their portfolios to this stock.
Since TechnipFMC plc (NYSE:FTI) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of money managers that slashed their full holdings heading into Q3. At the top of the heap, Till Bechtolsheimer's Arosa Capital Management sold off the biggest position of the 700 funds followed by Insider Monkey, worth an estimated $25.2 million in stock, and John Brennan's Sirios Capital Management was right behind this move, as the fund dropped about $14.4 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to TechnipFMC plc (NYSE:FTI). We will take a look at Lennox International Inc. (NYSE:LII), NVR, Inc. (NYSE:NVR), Reinsurance Group of America Inc (NYSE:RGA), and Shaw Communications Inc (NYSE:SJR). This group of stocks' market valuations match FTI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LII,24,213167,1 NVR,31,830929,6 RGA,27,566098,6 SJR,14,204319,-2 Average,24,453628,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $454 million. That figure was $429 million in FTI's case. NVR, Inc. (NYSE:NVR) is the most popular stock in this table. On the other hand Shaw Communications Inc (NYSE:SJR) is the least popular one with only 14 bullish hedge fund positions. TechnipFMC plc (NYSE:FTI) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on FTI, though not to the same extent, as the stock returned 17% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.