The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Federated Investors Inc (NYSE:FII) based on those filings.
Federated Investors Inc (NYSE:FII) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that FII 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.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dmitry Balyasny of Balyasny Asset Managemnet
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. We’re going to analyze the latest hedge fund action surrounding Federated Investors Inc (NYSE:FII).
How have hedgies been trading Federated Investors Inc (NYSE:FII)?
Heading into the fourth quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in FII a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Federated Investors Inc (NYSE:FII) was held by Arrowstreet Capital, which reported holding $52.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $29.4 million position. Other investors bullish on the company included Balyasny Asset Management, Citadel Investment Group, and Samlyn Capital. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Federated Investors Inc (NYSE:FII), around 1.88% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 1.16 percent of its 13F equity portfolio to FII.
As industrywide interest jumped, some big names were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the largest position in Federated Investors Inc (NYSE:FII). Tudor Investment Corp had $1.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new FII investors: John Overdeck and David Siegel’s Two Sigma Advisors, Donald Sussman’s Paloma Partners, and Renee Yao’s Neo Ivy Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Federated Investors Inc (NYSE:FII) but similarly valued. We will take a look at KAR Auction Services Inc (NYSE:KAR), B2Gold Corp (NYSE:BTG), United States Cellular Corporation (NYSE:USM), and PBF Energy Inc (NYSE:PBF). This group of stocks’ market values are similar to FII’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KAR | 30 | 574775 | -2 |
| BTG | 14 | 186035 | -3 |
| USM | 18 | 139096 | 3 |
| PBF | 28 | 245436 | 2 |
| Average | 22.5 | 286336 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $213 million in FII’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand B2Gold Corp (NYSE:BTG) is the least popular one with only 14 bullish hedge fund positions. Federated Investors Inc (NYSE:FII) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FII wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FII were disappointed as the stock returned 4.3% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
