Franco-Nevada Corporation (FNV): Insiders and Hedge Funds Aren’t Crazy About It

In the eyes of many investors, hedge funds are seen as useless, outdated investment tools of a period lost to current times. Although there are more than 8,000 hedge funds in operation currently, Insider Monkey aim at the bigwigs of this club, around 525 funds. It is widely held that this group oversees the majority of all hedge funds’ total assets, and by keeping an eye on their best stock picks, we’ve come up with a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (find the details here).

Just as useful, optimistic insider trading sentiment is another way to look at the world of equities. There are a variety of stimuli for an upper level exec to sell shares of his or her company, but just one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this tactic if shareholders know what to do (learn more here).

Thus, let’s analyze the latest info surrounding Franco-Nevada Corporation (NYSE:FNV).

What have hedge funds been doing with Franco-Nevada Corporation (NYSE:FNV)?

At Q2’s end, a total of 14 of the hedge funds we track were long in this stock, a change of 0% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially.

According to our 13F database, Matt McLennan’s First Eagle Investment Management had the most valuable position in Franco-Nevada Corporation (NYSE:FNV), worth close to $34.6 million, accounting for 0.1% of its total 13F portfolio. On First Eagle Investment Management’s heels is Horizon Asset Management, managed by Murray Stahl, which held a $25.1 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Jorge Paulo Lemann’s 3G Capital, Chuck Royce’s Royce & Associates and Anand Parekh’s Alyeska Investment Group.

Because Franco-Nevada Corporation (NYSE:FNV) has witnessed dropping sentiment from the smart money’s best and brightest, it’s safe to say that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that John Thiessen’s Vertex One Asset Management dropped the biggest stake of the 450+ funds we key on, totaling close to $10 million in stock, and Matthew Tewksbury of Stevens Capital Management was right behind this move, as the fund dumped about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Franco-Nevada Corporation (NYSE:FNV)?

Insider buying made by high-level executives is best served when the primary stock in question has experienced transactions within the past six months. Over the last six-month time period, Franco-Nevada Corporation (NYSE:FNV) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to Franco-Nevada Corporation (NYSE:FNV). These stocks are Randgold Resources Ltd. (ADR) (NASDAQ:GOLD), Gold Fields Limited (ADR) (NYSE:GFI), Compania de Minas Buenaventura SA (ADR) (NYSE:BVN), Agnico-Eagle Mines Limited (USA) (NYSE:AEM), and Eldorado Gold Corp (USA) (NYSE:EGO). All of these stocks are in the gold industry and their market caps match FNV’s market cap.

Using the returns demonstrated by Insider Monkey’s tactics, regular investors should always watch hedge fund and insider trading sentiment, and Franco-Nevada Corporation (NYSE:FNV) applies perfectly to this mantra.

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