Funko, Inc. (FNKO): Hedge Funds Are Snapping Up

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Funko, Inc. (NASDAQ:FNKO).

Funko, Inc. (NASDAQ:FNKO) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Funko, Inc. (NASDAQ:FNKO) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 23. Our calculations also showed that FNKO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Michael Gelband of ExodusPoint Capital

Keeping this in mind let’s review the latest hedge fund action encompassing Funko, Inc. (NASDAQ:FNKO).

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

Heading into the third quarter of 2021, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in FNKO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, James Woodson Davis’s Woodson Capital Management has the number one position in Funko, Inc. (NASDAQ:FNKO), worth close to $76.6 million, corresponding to 4.9% of its total 13F portfolio. Coming in second is D E Shaw, led by D. E. Shaw, holding a $14.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Richard Driehaus’s Driehaus Capital, Jeff Osher’s No Street Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Funko, Inc. (NASDAQ:FNKO), around 4.93% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, setting aside 3.31 percent of its 13F equity portfolio to FNKO.

As one would reasonably expect, key money managers were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, created the largest position in Funko, Inc. (NASDAQ:FNKO). Driehaus Capital had $14.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $3.2 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Funko, Inc. (NASDAQ:FNKO) but similarly valued. We will take a look at Federal Agricultural Mortgage Corp. (NYSE:AGM), Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), Premier Financial Corp. (NASDAQ:PFC), 908 Devices Inc. (NASDAQ:MASS), Denny’s Corporation (NASDAQ:DENN), Varex Imaging Corporation (NASDAQ:VREX), and RPT Realty (NYSE:RPT). This group of stocks’ market values are similar to FNKO’s market value.

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As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $177 million in FNKO’s case. Denny’s Corporation (NASDAQ:DENN) is the most popular stock in this table. On the other hand Federal Agricultural Mortgage Corp. (NYSE:AGM) is the least popular one with only 7 bullish hedge fund positions. Funko, Inc. (NASDAQ:FNKO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FNKO is 80.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately FNKO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FNKO were disappointed as the stock returned -17.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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