Franklin Resources, Inc. (BEN) Fell Out Of Favor With Hedge Funds

In this article we will analyze whether Franklin Resources, Inc. (NYSE:BEN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Franklin Resources, Inc. (NYSE:BEN) was in 28 hedge funds’ portfolios at the end of September. The all time high for this statistic is 39. BEN shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 30 hedge funds in our database with BEN holdings at the end of June. Our calculations also showed that BEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s analyze the fresh hedge fund action encompassing Franklin Resources, Inc. (NYSE:BEN).

Prem Watsa of Fairfax Financial Holdings

Do Hedge Funds Think BEN Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BEN over the last 25 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

The largest stake in Franklin Resources, Inc. (NYSE:BEN) was held by Citadel Investment Group, which reported holding $115 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $49.9 million position. Other investors bullish on the company included Arrowstreet Capital, Fairfax Financial Holdings, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Franklin Resources, Inc. (NYSE:BEN), around 1.5% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, designating 1.32 percent of its 13F equity portfolio to BEN.

Due to the fact that Franklin Resources, Inc. (NYSE:BEN) has experienced bearish sentiment from the smart money, logic holds that there were a few hedge funds that slashed their positions entirely in the third quarter. Interestingly, D. E. Shaw’s D E Shaw dumped the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $0.9 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $0.8 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Franklin Resources, Inc. (NYSE:BEN) but similarly valued. We will take a look at Masimo Corporation (NASDAQ:MASI), Logitech International SA (NASDAQ:LOGI), FactSet Research Systems Inc. (NYSE:FDS), Huazhu Group Limited (NASDAQ:HTHT), Camden Property Trust (NYSE:CPT), LKQ Corporation (NASDAQ:LKQ), and ABIOMED, Inc. (NASDAQ:ABMD). This group of stocks’ market values resemble BEN’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $792 million. That figure was $359 million in BEN’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 20 bullish hedge fund positions. Franklin Resources, Inc. (NYSE:BEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BEN is 46.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on BEN as the stock returned 11.9% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.