Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Franklin Covey Co. (NYSE:FC) was in 8 hedge funds’ portfolios at the end of September. FC shareholders have witnessed an increase in hedge fund interest of late. There were 6 hedge funds in our database with FC holdings at the end of the previous quarter. 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 Electrum Special Acquisition Corp (NASDAQ:ELECU), Lantheus Holdings Inc (NASDAQ:LNTH), and Celadon Group, Inc. (NYSE:CGI) to gather more data points.
Follow Franklin Covey Co (NYSE:FC)
Follow Franklin Covey Co (NYSE:FC)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, we’re going to take a look at the latest action regarding Franklin Covey Co. (NYSE:FC).
What does the smart money think about Franklin Covey Co. (NYSE:FC)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards FC over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Osmium Partners, led by John H Lewis, holds the biggest position in Franklin Covey Co. (NYSE:FC). Osmium Partners has a $8.6 million call position in the stock, comprising 7.1% of its 13F portfolio. The second largest stake is held by Osmium Partners, led by John H Lewis, which holds a $8.1 million position; the fund has 6.7% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Julian Allen’s Spitfire Capital, Richard McGuire’s Marcato Capital Management and Chuck Royce’s Royce & Associates. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, specific money managers were leading the bulls’ herd. Osmium Partners, led by John H Lewis, initiated the largest call position in Franklin Covey Co. (NYSE:FC). Osmium Partners had $8.6 million invested in the company at the end of the quarter. Richard McGuire’s Marcato Capital Management also made a $3.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Franklin Covey Co. (NYSE:FC) but similarly valued. These stocks are Electrum Special Acquisition Corp (NASDAQ:ELECU), Lantheus Holdings Inc (NASDAQ:LNTH), Celadon Group, Inc. (NYSE:CGI), and Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC). All of these stocks’ market caps match FC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ELECU | 17 | 107722 | -1 |
| LNTH | 12 | 16275 | 8 |
| CGI | 9 | 12767 | 5 |
| NGVC | 6 | 10658 | 1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $33 million in FC’s case. Electrum Special Acquisition Corp (NASDAQ:ELECU) is the most popular stock in this table. On the other hand Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) is the least popular one with only 6 bullish hedge fund positions. Franklin Covey Co. (NYSE:FC) 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 are piling on. In this regard ELECU might be a better candidate to consider taking a long position in.
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Disclosure: None
