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Was The Smart Money Wrong About FLIR Systems, Inc. (FLIR)?

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Reymerlyn Martin
·6 min read
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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding FLIR Systems, Inc. (NASDAQ:FLIR).

Is FLIR Systems, Inc. (NASDAQ:FLIR) an attractive investment today? Investors who are in the know were becoming more confident. The number of long hedge fund bets advanced by 4 lately. FLIR Systems, Inc. (NASDAQ:FLIR) was in 38 hedge funds' portfolios at the end of June. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FLIR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 34 hedge funds in our database with FLIR holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are a multitude of methods investors use to size up publicly traded companies. A duo of the most innovative methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid margin (see the details here).

CHILTON INVESTMENT COMPANY
CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let's go over the recent hedge fund action regarding FLIR Systems, Inc. (NASDAQ:FLIR).

How have hedgies been trading FLIR Systems, Inc. (NASDAQ:FLIR)?

At second quarter's end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the first quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in FLIR a year ago. 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, Polar Capital was the largest shareholder of FLIR Systems, Inc. (NASDAQ:FLIR), with a stake worth $53.5 million reported as of the end of June. Trailing Polar Capital was Arrowstreet Capital, which amassed a stake valued at $47.6 million. Royce & Associates, Millennium Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tenzing Global Investors allocated the biggest weight to FLIR Systems, Inc. (NASDAQ:FLIR), around 3.29% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, earmarking 1.78 percent of its 13F equity portfolio to FLIR.

As aggregate interest increased, key money managers have jumped into FLIR Systems, Inc. (NASDAQ:FLIR) headfirst. Tenzing Global Investors, managed by Chet Kapoor, established the most valuable position in FLIR Systems, Inc. (NASDAQ:FLIR). Tenzing Global Investors had $6.7 million invested in the company at the end of the quarter. Michel Massoud's Melqart Asset Management also made a $6.6 million investment in the stock during the quarter. The other funds with brand new FLIR positions are George McCabe's Portolan Capital Management, Seth Cogswell's Running Oak Capital, and Richard Chilton's Chilton Investment Company.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as FLIR Systems, Inc. (NASDAQ:FLIR) but similarly valued. We will take a look at Axalta Coating Systems Ltd (NYSE:AXTA), Nielsen Holdings plc (NYSE:NLSN), Comerica Incorporated (NYSE:CMA), PLDT Inc. (NYSE:PHI), Ralph Lauren Corporation (NYSE:RL), Ares Management Corp (NYSE:ARES), and Churchill Downs Incorporated (NASDAQ:CHDN). All of these stocks' market caps are similar to FLIR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXTA,47,1340214,-2 NLSN,31,1177115,-2 CMA,36,423590,3 PHI,5,85702,-2 RL,25,499671,-1 ARES,20,448658,4 CHDN,25,470037,-6 Average,27,634998,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $635 million. That figure was $292 million in FLIR's case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. FLIR Systems, Inc. (NASDAQ:FLIR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FLIR is 78.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately FLIR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FLIR were disappointed as the stock returned -14.1% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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