Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Franklin Electric Co. (NASDAQ:FELE), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is FELE a good stock to buy now? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions advanced by 4 lately. Franklin Electric Co. (NASDAQ:FELE) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FELE 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). There were 15 hedge funds in our database with FELE positions at the end of the second quarter.
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman Paloma Partners
Donald Sussman of Paloma Partners
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 take a look at the new hedge fund action regarding Franklin Electric Co. (NASDAQ:FELE).
Do Hedge Funds Think FELE Is A Good Stock To Buy Now?
At the end of September, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FELE over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Franklin Electric Co. (NASDAQ:FELE) was held by Impax Asset Management, which reported holding $169.9 million worth of stock at the end of September. It was followed by GAMCO Investors with a $16.2 million position. Other investors bullish on the company included Arrowstreet Capital, Marshall Wace LLP, and Royce & Associates. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Franklin Electric Co. (NASDAQ:FELE), around 1.49% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 1.27 percent of its 13F equity portfolio to FELE.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Franklin Electric Co. (NASDAQ:FELE). Marshall Wace LLP had $6.5 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new FELE investors: Minhua Zhang's Weld Capital Management, Mika Toikka's AlphaCrest Capital Management, and Hoon Kim's Quantinno Capital.
Let's also examine hedge fund activity in other stocks similar to Franklin Electric Co. (NASDAQ:FELE). These stocks are Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Capri Holdings Limited (NYSE:CPRI), Alarm.com Holdings Inc (NASDAQ:ALRM), Amkor Technology, Inc. (NASDAQ:AMKR), Casella Waste Systems Inc. (NASDAQ:CWST), Green Dot Corporation (NYSE:GDOT), and Papa John's International, Inc. (NASDAQ:PZZA). All of these stocks' market caps resemble FELE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBRL,29,216139,7 CPRI,36,426536,8 ALRM,24,215299,0 AMKR,27,98077,4 CWST,17,145606,1 GDOT,28,539024,5 PZZA,38,392909,4 Average,28.4,290513,4.1 [/table]
As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $230 million in FELE's case. Papa John's International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Casella Waste Systems Inc. (NASDAQ:CWST) is the least popular one with only 17 bullish hedge fund positions. Franklin Electric Co. (NASDAQ:FELE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FELE is 43.8. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on FELE as the stock returned 20.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
