First Defiance Financial (FDEF): Hedge Funds Are Snapping Up

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze First Defiance Financial (NASDAQ:FDEF).

First Defiance Financial’s stock has been gaining ground since the beginning of the year and investors should pay attention to an increase in hedge fund interest lately. FDEF was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 9 hedge funds in our database with FDEF holdings at the end of the previous quarter. At the end of this article we will also compare FDEF to other stocks including Versartic Inc (NASDAQ:VSAR), Everi Holdings Inc (NYSE:EVRI), and American Vanguard Corp. (NYSE:AVD) to get a better sense of its popularity.

To most stock holders, hedge funds are viewed as unimportant, outdated financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the bigwigs of this club, around 700 funds. These investment experts control the lion’s share of all hedge funds’ total capital, and by tailing their finest investments, Insider Monkey has unearthed a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, let’s go over the latest action surrounding First Defiance Financial (NASDAQ:FDEF).

How have hedgies been trading First Defiance Financial (NASDAQ:FDEF)?

At the Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 11% from the previous quarter. Among these funds, Jim Simons’s Renaissance Technologies has the number one position in First Defiance Financial (NASDAQ:FDEF), worth close to $9.9 million, accounting for less than 0.1% of its total 13F portfolio. Coming in second is Castine Capital Management, managed by Paul Magidson, Jonathan Cohen, and Ostrom Enders, which holds a $4.3 million position; the fund has 2% of its 13F portfolio invested in the stock. The remaining members of the smart money that are bullish include Fred Cummings’ Elizabeth Park Capital Management, Israel Englander’s Millennium Management, and Jeffrey Gendell’s Tontine Asset Management.

Consequently, key money managers were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, created the most outsized position in First Defiance Financial (NASDAQ:FDEF). AQR Capital Management had $0.4 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.4 million investment in the stock during the quarter. The only other fund with a brand new FDEF position is Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to First Defiance Financial (NASDAQ:FDEF). We will take a look at Versartic Inc (NASDAQ:VSAR), Everi Holdings Inc (NYSE:EVRI), American Vanguard Corp. (NYSE:AVD), and Enova International Inc (NYSE:ENVA). This group of stocks’ market caps are similar to FDEF’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $22 million in FDEF’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand American Vanguard Corp. (NYSE:AVD) is the least popular one with only 6 bullish hedge fund positions. First Defiance Financial (NASDAQ:FDEF) 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 EVRI might be a better candidate to consider a long position.