It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Federated Investors Inc (NYSE:FII).
Is Federated Investors Inc (NYSE:FII) a buy right now? Money managers are becoming more confident. The number of long hedge fund bets rose by 6 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Emcor Group Inc (NYSE:EME), Lions Gate Entertainment Corp. (USA) (NYSE:LGF), and NuVasive, Inc. (NASDAQ:NUVA) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Federated Investors Inc (NYSE:FII)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a jump of 38% from the previous quarter, pushing the stock to new heights in terms of smart money ownership. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in Federated Investors Inc (NYSE:FII). Royce & Associates has a $133.4 million position in the stock. Coming in second is Renaissance Technologies, managed by Jim Simons, which holds a $23.8 million position. Other members of the smart money that are bullish include D E Shaw, Murray Stahl’s Horizon Asset Management, and John D. Gillespie’s Prospector Partners.
As aggregate interest increased, some big names were breaking ground themselves. Sprott Asset Management, managed by Eric Sprott, created the most valuable position in Federated Investors Inc (NYSE:FII). Sprott Asset Management had $3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $2.3 million position during the quarter. The following funds were also among the new FII investors: Mike Vranos’ Ellington, Ken Griffin’s Citadel Investment Group, and Neil Chriss’ Hutchin Hill Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Federated Investors Inc (NYSE:FII) but similarly valued. We will take a look at Emcor Group Inc (NYSE:EME), Lions Gate Entertainment Corp. (USA) (NYSE:LGF), NuVasive, Inc. (NASDAQ:NUVA), and Two Harbors Investment Corp (NYSE:TWO). All of these stocks’ market caps match FII’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EME | 17 | 121478 | -3 |
| LGF | 28 | 971484 | -12 |
| NUVA | 27 | 381837 | -2 |
| TWO | 21 | 111088 | 3 |
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $219 million in FII’s case. Lions Gate Entertainment Corp. (USA) (NYSE:LGF) is the most popular stock in this table. On the other hand Emcor Group Inc (NYSE:EME) is the least popular one with only 17 bullish hedge fund positions. Federated Investors Inc (NYSE:FII) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds really like. In this regard LGF might be a better candidate to consider a long position in, despite its recent tumble in smart money ownership.
Disclosure: None
