While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter 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 Fair Isaac Corporation (NYSE:FICO).
Fair Isaac Corporation (NYSE:FICO) has seen an increase in activity from the world’s largest hedge funds recently. FICO was in 40 hedge funds’ portfolios at the end of September. There were 34 hedge funds in our database with FICO positions at the end of the previous quarter. Our calculations also showed that FICO isn’t among the 30 most popular stocks among hedge funds.
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.
Cliff Asness of AQR Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the latest hedge fund action regarding Fair Isaac Corporation (NYSE:FICO).
What have hedge funds been doing with Fair Isaac Corporation (NYSE:FICO)?
At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in FICO over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Newbrook Capital Advisors, managed by Robert Boucai, holds the number one position in Fair Isaac Corporation (NYSE:FICO). Newbrook Capital Advisors has a $117.7 million position in the stock, comprising 9.2% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $105.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish consist of Dev Kantesaria’s Valley Forge Capital, Cliff Asness’s AQR Capital Management and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Valley Forge Capital allocated the biggest weight to Fair Isaac Corporation (NYSE:FICO), around 22.56% of its portfolio. Broad Bay Capital is also relatively very bullish on the stock, setting aside 10.77 percent of its 13F equity portfolio to FICO.
Consequently, specific money managers were breaking ground themselves. Point State Capital, managed by Zach Schreiber, created the most valuable position in Fair Isaac Corporation (NYSE:FICO). Point State Capital had $38.4 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $20.2 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Matthew Iorio’s White Elm Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Fair Isaac Corporation (NYSE:FICO). These stocks are Huntington Ingalls Industries Inc (NYSE:HII), WEX Inc (NYSE:WEX), Medical Properties Trust, Inc. (NYSE:MPW), and Qorvo Inc (NASDAQ:QRVO). This group of stocks’ market valuations resemble FICO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HII | 19 | 589653 | -4 |
| WEX | 25 | 474044 | -6 |
| MPW | 12 | 241800 | -1 |
| QRVO | 35 | 1240574 | 7 |
| Average | 22.75 | 636518 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $637 million. That figure was $873 million in FICO’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Medical Properties Trust, Inc. (NYSE:MPW) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Fair Isaac Corporation (NYSE:FICO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on FICO as the stock returned 17.2% during Q4 (through 11/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
