Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2019. What do these smart investors think about Keysight Technologies Inc (NYSE:KEYS)?
Keysight Technologies Inc (NYSE:KEYS) was in 49 hedge funds' portfolios at the end of the fourth quarter of 2019. KEYS shareholders have witnessed a decrease in hedge fund interest lately. There were 50 hedge funds in our database with KEYS positions at the end of the previous quarter. Our calculations also showed that KEYS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 41 percentage points since March 2017 (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="400"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we're going to take a glance at the key hedge fund action regarding Keysight Technologies Inc (NYSE:KEYS).
How have hedgies been trading Keysight Technologies Inc (NYSE:KEYS)?
At the end of the fourth quarter, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KEYS over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Noam Gottesman's GLG Partners has the largest position in Keysight Technologies Inc (NYSE:KEYS), worth close to $126.4 million, comprising 0.4% of its total 13F portfolio. The second largest stake is held by John W. Rogers of Ariel Investments, with a $119.2 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Paul Marshall and Ian Wace's Marshall Wace LLP and John Brennan's Sirios Capital Management. In terms of the portfolio weights assigned to each position Banbury Partners allocated the biggest weight to Keysight Technologies Inc (NYSE:KEYS), around 8.62% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, dishing out 5.38 percent of its 13F equity portfolio to KEYS.
Seeing as Keysight Technologies Inc (NYSE:KEYS) has witnessed declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of fund managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Ernest Chow and Jonathan Howe's Sensato Capital Management dumped the largest stake of the "upper crust" of funds watched by Insider Monkey, worth an estimated $12.3 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund dumped about $9.6 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Keysight Technologies Inc (NYSE:KEYS). These stocks are Apollo Global Management LLC (NYSE:APO), New Oriental Education & Tech Group Inc. (NYSE:EDU), Tencent Music Entertainment Group (NYSE:TME), and Fortis Inc. (NYSE:FTS). This group of stocks' market caps resemble KEYS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APO,29,2225310,5 EDU,50,1375166,12 TME,26,515443,10 FTS,14,768397,-1 Average,29.75,1221079,6.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $1221 million. That figure was $1020 million in KEYS's case. New Oriental Education & Tech Group Inc. (NYSE:EDU) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 14 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. Hedge funds were also right about betting on KEYS, though not to the same extent, as the stock returned -13.1% during the first two months of 2020 (through March 9th) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.