At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards FutureFuel Corp. (NYSE:FF) at the end of the first quarter and determine whether the smart money was really smart about this stock.
FutureFuel Corp. (NYSE:FF) was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. FF shareholders have witnessed an increase in hedge fund sentiment of late. There were 10 hedge funds in our database with FF holdings at the end of the previous quarter. Our calculations also showed that FF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a lot of tools market participants employ to analyze their holdings. A couple of the most innovative tools are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform their index-focused peers by a solid amount (see the details here).
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action regarding FutureFuel Corp. (NYSE:FF).
How have hedgies been trading FutureFuel Corp. (NYSE:FF)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in FF a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in FutureFuel Corp. (NYSE:FF) was held by Renaissance Technologies, which reported holding $27.9 million worth of stock at the end of September. It was followed by Royce & Associates with a $8.2 million position. Other investors bullish on the company included Arrowstreet Capital, Yacktman Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to FutureFuel Corp. (NYSE:FF), around 0.11% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to FF.
As one would reasonably expect, specific money managers have been driving this bullishness. Yacktman Asset Management, managed by Donald Yacktman, initiated the largest position in FutureFuel Corp. (NYSE:FF). Yacktman Asset Management had $2.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.3 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to FutureFuel Corp. (NYSE:FF). These stocks are Trueblue Inc (NYSE:TBI), United Natural Foods, Inc. (NASDAQ:UNFI), e.l.f. Beauty, Inc. (NYSE:ELF), and PGT Innovations Inc. (NASDAQ:PGTI). This group of stocks’ market caps are closest to FF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TBI | 10 | 32248 | -5 |
| UNFI | 18 | 42616 | 5 |
| ELF | 20 | 135402 | -4 |
| PGTI | 14 | 36577 | 4 |
| Average | 15.5 | 61711 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $45 million in FF’s case. e.l.f. Beauty, Inc. (NYSE:ELF) is the most popular stock in this table. On the other hand Trueblue Inc (NYSE:TBI) is the least popular one with only 10 bullish hedge fund positions. FutureFuel Corp. (NYSE:FF) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on FF as the stock returned 40.2% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
