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Where Do Hedge Funds Stand On SPX FLOW (FLOW)?

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Debasis Saha
·6 min read
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In this article you are going to find out whether hedge funds think SPX FLOW, Inc. (NASDAQ:FLOW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

SPX FLOW, Inc. (NASDAQ:FLOW) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 24. FLOW has experienced an increase in hedge fund sentiment of late. There were 10 hedge funds in our database with FLOW positions at the end of the second quarter. Our calculations also showed that FLOW isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management
Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind we're going to view the new hedge fund action regarding SPX FLOW, Inc. (NASDAQ:FLOW).

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

At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the second quarter of 2020. On the other hand, there were a total of 12 hedge funds with a bullish position in FLOW a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FLOW A Good Stock To Buy?
Is FLOW A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Impax Asset Management, managed by Ian Simm, holds the number one position in SPX FLOW, Inc. (NASDAQ:FLOW). Impax Asset Management has a $93.3 million position in the stock, comprising 0.8% of its 13F portfolio. The second most bullish fund manager is Diamond Hill Capital, led by Ric Dillon, holding a $34.6 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, D. E. Shaw's D E Shaw and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to SPX FLOW, Inc. (NASDAQ:FLOW), around 0.82% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.36 percent of its 13F equity portfolio to FLOW.

Now, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in SPX FLOW, Inc. (NASDAQ:FLOW). Millennium Management had $0.9 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.9 million investment in the stock during the quarter. The other funds with brand new FLOW positions are Paul Tudor Jones's Tudor Investment Corp, Donald Sussman's Paloma Partners, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's check out hedge fund activity in other stocks similar to SPX FLOW, Inc. (NASDAQ:FLOW). We will take a look at Yext, Inc. (NYSE:YEXT), American National Insurance Company (NASDAQ:ANAT), IAMGOLD Corporation (NYSE:IAG), Investors Bancorp, Inc. (NASDAQ:ISBC), Ambarella Inc (NASDAQ:AMBA), Euronav NV (NYSE:EURN), and Barnes Group Inc. (NYSE:B). This group of stocks' market values resemble FLOW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YEXT,11,24921,1 ANAT,12,30001,2 IAG,16,151044,-2 ISBC,28,138234,3 AMBA,34,191991,7 EURN,11,67614,-6 B,13,37329,-6 Average,17.9,91591,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $153 million in FLOW's case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Yext, Inc. (NYSE:YEXT) is the least popular one with only 11 bullish hedge fund positions. SPX FLOW, Inc. (NASDAQ:FLOW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FLOW is 28.6. 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. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on FLOW as the stock returned 32.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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

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