Fair Isaac Corporation (FICO): Are Hedge Funds Right About This Stock?

Is Fair Isaac Corporation (NYSE:FICO) a good investment today? Money managers are getting less optimistic. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience

If you’d ask most stock holders, hedge funds are seen as underperforming, old investment tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the masters of this group, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total capital, and by watching their highest performing equity investments, we have found a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as key, positive insider trading sentiment is another way to parse down the marketplace. There are a variety of reasons for an executive to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the impressive potential of this tactic if shareholders know where to look (learn more here).

Keeping this in mind, we’re going to take a peek at the key action surrounding Fair Isaac Corporation (NYSE:FICO).

How have hedgies been trading Fair Isaac Corporation (NYSE:FICO)?

At Q1’s end, a total of 13 of the hedge funds we track were long in this stock, a change of 0% from the first quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully.

Of the funds we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Fair Isaac Corporation (NYSE:FICO). Royce & Associates has a $115.5 million position in the stock, comprising 0.4% of its 13F portfolio. On Royce & Associates’s heels is John W. Rogers of Ariel Investments, with a $90 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include D. E. Shaw’s D E Shaw, Jim Simons’s Renaissance Technologies and Cliff Asness’s AQR Capital Management.

Seeing as Fair Isaac Corporation (NYSE:FICO) has faced falling interest from the smart money, we can see that there were a few money managers that elected to cut their positions entirely last quarter. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management cut the biggest position of the 450+ funds we monitor, totaling close to $0.6 million in stock. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Fair Isaac Corporation (NYSE:FICO)?

Bullish insider trading is particularly usable when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Fair Isaac Corporation (NYSE:FICO) has seen zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Fair Isaac Corporation (NYSE:FICO). These stocks are Zillow Inc (NASDAQ:Z), The Advisory Board Company (NASDAQ:ABCO), Healthcare Services Group, Inc. (NASDAQ:HCSG), Shutterstock Inc (NYSE:SSTK), and Giant Interactive Group Inc (ADR) (NYSE:GA). This group of stocks belong to the business services industry and their market caps match FICO’s market cap.

With the returns demonstrated by Insider Monkey’s studies, retail investors must always monitor hedge fund and insider trading sentiment, and Fair Isaac Corporation (NYSE:FICO) is an important part of this process.

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