“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on FTI Consulting, Inc. (NYSE:FCN) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is FTI Consulting, Inc. (NYSE:FCN) the right pick for your portfolio? Hedge funds are becoming more confident. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that FCN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Martin Whitman of Third Avenue Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the latest hedge fund action surrounding FTI Consulting, Inc. (NYSE:FCN).
Hedge fund activity in FTI Consulting, Inc. (NYSE:FCN)
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FCN over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Greenvale Capital was the largest shareholder of FTI Consulting, Inc. (NYSE:FCN), with a stake worth $34.4 million reported as of the end of September. Trailing Greenvale Capital was GLG Partners, which amassed a stake valued at $19.8 million. Renaissance Technologies, AQR Capital Management, and Third Avenue Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to FTI Consulting, Inc. (NYSE:FCN), around 10.31% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 0.83 percent of its 13F equity portfolio to FCN.
With a general bullishness amongst the heavyweights, key money managers have jumped into FTI Consulting, Inc. (NYSE:FCN) headfirst. Columbus Circle Investors, managed by Principal Global Investors, initiated the most outsized position in FTI Consulting, Inc. (NYSE:FCN). Columbus Circle Investors had $7.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $3.9 million position during the quarter. The following funds were also among the new FCN investors: Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Donald Sussman’s Paloma Partners, and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks similar to FTI Consulting, Inc. (NYSE:FCN). These stocks are IBERIABANK Corporation (NASDAQ:IBKC), Outfront Media Inc (NYSE:OUT), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), and The Medicines Company (NASDAQ:MDCO). This group of stocks’ market caps are similar to FCN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBKC | 19 | 163668 | -6 |
| OUT | 29 | 478492 | 7 |
| AJRD | 21 | 465161 | 3 |
| MDCO | 32 | 1149542 | -1 |
| Average | 25.25 | 564216 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $564 million. That figure was $139 million in FCN’s case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand IBERIABANK Corporation (NASDAQ:IBKC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks FTI Consulting, Inc. (NYSE:FCN) is even less popular than IBKC. Hedge funds dodged a bullet by taking a bearish stance towards FCN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FCN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FCN investors were disappointed as the stock returned 2.8% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
