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Were Hedge Funds Right About Fulgent Genetics, Inc. (FLGT)?

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Fulgent Genetics, Inc. (NASDAQ:FLGT).

Is Fulgent Genetics, Inc. (NASDAQ:FLGT) a buy right now? The best stock pickers were becoming hopeful. The number of long hedge fund positions advanced by 6 lately. Fulgent Genetics, Inc. (NASDAQ:FLGT) was in 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 12. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FLGT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 12 hedge funds in our database with FLGT holdings at the end of December.

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Och-Ziff Capital Management
Och-Ziff Capital Management

Daniel Och, Founder of OZ Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we're going to view the fresh hedge fund action regarding Fulgent Genetics, Inc. (NASDAQ:FLGT).

Do Hedge Funds Think FLGT Is A Good Stock To Buy Now?

At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FLGT over the last 23 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FLGT A Good Stock To Buy?
Is FLGT A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Julian Baker and Felix Baker's Baker Bros. Advisors has the largest position in Fulgent Genetics, Inc. (NASDAQ:FLGT), worth close to $38.7 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $31.3 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism contain Ken Griffin's Citadel Investment Group, Daniel S. Och's OZ Management and Richard Driehaus's Driehaus Capital. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Fulgent Genetics, Inc. (NASDAQ:FLGT), around 0.39% of its 13F portfolio. Baker Bros. Advisors is also relatively very bullish on the stock, dishing out 0.17 percent of its 13F equity portfolio to FLGT.

As one would reasonably expect, specific money managers were leading the bulls' herd. GLG Partners, managed by Noam Gottesman, initiated the most outsized position in Fulgent Genetics, Inc. (NASDAQ:FLGT). GLG Partners had $5.2 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $1.9 million position during the quarter. The following funds were also among the new FLGT investors: D. E. Shaw's D E Shaw, Joel Greenblatt's Gotham Asset Management, and D. E. Shaw's D E Shaw.

Let's now review hedge fund activity in other stocks similar to Fulgent Genetics, Inc. (NASDAQ:FLGT). These stocks are Nelnet, Inc. (NYSE:NNI), American States Water Co (NYSE:AWR), Kontoor Brands, Inc. (NASDAQ:KTB), Macquarie Infrastructure Corporation (NYSE:MIC), CarGurus, Inc. (NASDAQ:CARG), Brady Corp (NYSE:BRC), and Greif, Inc. (NYSE:GEF). This group of stocks' market values are similar to FLGT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NNI,11,171625,-3 AWR,14,38906,-4 KTB,16,110576,0 MIC,33,663374,2 CARG,29,266502,-4 BRC,16,137441,1 GEF,13,127687,0 Average,18.9,216587,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $99 million in FLGT's case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 11 bullish hedge fund positions. Fulgent Genetics, Inc. (NASDAQ:FLGT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FLGT is 55.9. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately FLGT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FLGT investors were disappointed as the stock returned -7.4% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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