Were Hedge Funds Right About Buying Hollysys Automation Technologies Ltd (HOLI)?

·5 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Hollysys Automation Technologies Ltd (NASDAQ:HOLI).

Hollysys Automation Technologies Ltd (NASDAQ:HOLI) investors should be aware of an increase in hedge fund sentiment in recent months. Hollysys Automation Technologies Ltd (NASDAQ:HOLI) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 22. Our calculations also showed that HOLI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw
David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

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. Keeping this in mind let's take a gander at the fresh hedge fund action encompassing Hollysys Automation Technologies Ltd (NASDAQ:HOLI).

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

At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HOLI 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 HOLI A Good Stock To Buy?
Is HOLI A Good Stock To Buy?

The largest stake in Hollysys Automation Technologies Ltd (NASDAQ:HOLI) was held by Yiheng Capital, which reported holding $37.1 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $23.8 million position. Other investors bullish on the company included Halcyon Asset Management, Pentwater Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to Hollysys Automation Technologies Ltd (NASDAQ:HOLI), around 1.68% of its 13F portfolio. Halcyon Asset Management is also relatively very bullish on the stock, earmarking 1.36 percent of its 13F equity portfolio to HOLI.

Now, some big names were leading the bulls' herd. Maso Capital, managed by Manoj Jain and Sohit Khurana, created the biggest position in Hollysys Automation Technologies Ltd (NASDAQ:HOLI). Maso Capital had $1.6 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.3 million position during the quarter. The other funds with brand new HOLI positions are Donald Sussman's Paloma Partners and Phil Frohlich's Prescott Group Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Hollysys Automation Technologies Ltd (NASDAQ:HOLI) but similarly valued. These stocks are Helix Energy Solutions Group Inc. (NYSE:HLX), SP Plus Corp (NASDAQ:SP), Glatfelter Corp (NYSE:GLT), Clene Inc. (NASDAQ:CLNN), Modine Manufacturing Company (NYSE:MOD), Universal Electronics Inc (NASDAQ:UEIC), and IDEAYA Biosciences, Inc. (NASDAQ:IDYA). All of these stocks' market caps match HOLI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HLX,11,15044,0 SP,10,27117,-4 GLT,8,30694,1 CLNN,8,6341,6 MOD,17,131711,-2 UEIC,10,18048,-2 IDYA,15,133532,1 Average,11.3,51784,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.3 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $91 million in HOLI's case. Modine Manufacturing Company (NYSE:MOD) is the most popular stock in this table. On the other hand Glatfelter Corp (NYSE:GLT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Hollysys Automation Technologies Ltd (NASDAQ:HOLI) is more popular among hedge funds. Our overall hedge fund sentiment score for HOLI is 81.5. 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 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 returned 28.5% in 2021 through July 23rd but still managed to beat the market by 10.1 percentage points. Hedge funds were also right about betting on HOLI as the stock returned 25.8% since the end of March (through 7/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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