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Is Plexus Corp. (PLXS) A Good Stock To Buy?

Reymerlyn Martin

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 15 S&P 500 stocks among hedge funds at the end of December 2018 yielded an average return of 19.7% year-to-date, vs. a gain of 13.1% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Plexus Corp. (NASDAQ:PLXS).

Plexus Corp. (NASDAQ:PLXS) investors should be aware of an increase in hedge fund interest recently. PLXS was in 14 hedge funds' portfolios at the end of December. There were 12 hedge funds in our database with PLXS positions at the end of the previous quarter. Our calculations also showed that PLXS 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.

Chuck Royce

Let's go over the recent hedge fund action surrounding Plexus Corp. (NASDAQ:PLXS).

How have hedgies been trading Plexus Corp. (NASDAQ:PLXS)?

At Q4's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards PLXS over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PLXS_april2019

The largest stake in Plexus Corp. (NASDAQ:PLXS) was held by Fisher Asset Management, which reported holding $36.6 million worth of stock at the end of December. It was followed by Royce & Associates with a $7.7 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Renaissance Technologies.

As aggregate interest increased, some big names have jumped into Plexus Corp. (NASDAQ:PLXS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Plexus Corp. (NASDAQ:PLXS). Marshall Wace LLP had $3.6 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $2.1 million position during the quarter. The only other fund with a new position in the stock is Benjamin A. Smith's Laurion Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Plexus Corp. (NASDAQ:PLXS) but similarly valued. We will take a look at Progress Software Corporation (NASDAQ:PRGS), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Grupo Simec S.A.B. de C.V. (NYSEAMEX:SIM), and M.D.C. Holdings, Inc. (NYSE:MDC). This group of stocks' market values resemble PLXS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRGS,22,242639,-2 PPBI,9,69154,0 SIM,1,2346,0 MDC,16,107711,5 Average,12,105463,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $72 million in PLXS's case. Progress Software Corporation (NASDAQ:PRGS) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSEAMEX:SIM) is the least popular one with only 1 bullish hedge fund positions. Plexus Corp. (NASDAQ:PLXS) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on PLXS, though not to the same extent, as the stock returned 18.3% and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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