Were Hedge Funds Right About Flocking Into Fox Factory Holding Corp (FOXF) ?

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Reymerlyn Martin

Tue, Apr 30, 2019, 6:11 PM

Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Fox Factory Holding Corp (NASDAQ:FOXF).

Is Fox Factory Holding Corp (NASDAQ:FOXF) going to take off soon? Money managers are getting more optimistic. The number of bullish hedge fund positions moved up by 1 recently. Our calculations also showed that FOXF isn't among the 30 most popular stocks among hedge funds.

To most stock holders, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are greater than 8000 funds in operation at present, Our researchers look at the bigwigs of this club, around 750 funds. It is estimated that this group of investors orchestrate the majority of the hedge fund industry's total asset base, and by paying attention to their unrivaled investments, Insider Monkey has figured out a number of investment strategies that have historically outrun the broader indices. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Let's view the new hedge fund action encompassing Fox Factory Holding Corp (NASDAQ:FOXF).

What have hedge funds been doing with Fox Factory Holding Corp (NASDAQ:FOXF)?

At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FOXF over the last 14 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Fox Factory Holding Corp (NASDAQ:FOXF), which was worth $19.8 million at the end of December. On the second spot was Winton Capital Management which amassed $11.3 million worth of shares. Moreover, Royce & Associates, Driehaus Capital, and PEAK6 Capital Management were also bullish on Fox Factory Holding Corp (NASDAQ:FOXF), allocating a large percentage of their portfolios to this stock.

Now, key money managers have jumped into Fox Factory Holding Corp (NASDAQ:FOXF) headfirst. GLG Partners, managed by Noam Gottesman, created the biggest position in Fox Factory Holding Corp (NASDAQ:FOXF). GLG Partners had $1.7 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $1.4 million investment in the stock during the quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Fox Factory Holding Corp (NASDAQ:FOXF) but similarly valued. These stocks are Simmons First National Corporation (NASDAQ:SFNC), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), 360 Finance, Inc. (NASDAQ:QFIN), and First Interstate Bancsystem Inc (NASDAQ:FIBK). This group of stocks' market valuations match FOXF's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFNC,7,12428,-2 ARI,10,34816,3 QFIN,2,1897,2 FIBK,13,82956,1 Average,8,33024,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $47 million in FOXF's case. First Interstate Bancsystem Inc (NASDAQ:FIBK) is the most popular stock in this table. On the other hand 360 Finance, Inc. (NASDAQ:QFIN) is the least popular one with only 2 bullish hedge fund positions. Fox Factory Holding Corp (NASDAQ:FOXF) 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 FOXF as the stock returned 31.6% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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