We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of FirstService Corporation (NASDAQ:FSV) based on that data.
Is FirstService Corporation (NASDAQ:FSV) the right investment to pursue these days? Money managers are taking a bearish view. The number of bullish hedge fund bets fell by 1 lately. Our calculations also showed that FSV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). FSV was in 12 hedge funds’ portfolios at the end of December. There were 13 hedge funds in our database with FSV holdings at the end of the previous quarter.
To most market participants, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the aristocrats of this club, around 850 funds. These investment experts handle bulk of the smart money’s total capital, and by monitoring their first-class stock picks, Insider Monkey has unsheathed several investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Blair Levinsky of Waratah Capital Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the key hedge fund action encompassing FirstService Corporation (NASDAQ:FSV).
What have hedge funds been doing with FirstService Corporation (NASDAQ:FSV)?
At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in FSV a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in FirstService Corporation (NASDAQ:FSV) was held by Renaissance Technologies, which reported holding $90.3 million worth of stock at the end of September. It was followed by Royce & Associates with a $21.4 million position. Other investors bullish on the company included Waratah Capital Advisors, Millennium Management, and Lionstone Capital Management. In terms of the portfolio weights assigned to each position Lionstone Capital Management allocated the biggest weight to FirstService Corporation (NASDAQ:FSV), around 6.98% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, setting aside 1.73 percent of its 13F equity portfolio to FSV.
Since FirstService Corporation (NASDAQ:FSV) has witnessed falling interest from the smart money, it’s safe to say that there were a few money managers who were dropping their positions entirely heading into Q4. Interestingly, Richard Driehaus’s Driehaus Capital cut the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $0.3 million in stock. Peter Muller’s fund, PDT Partners, also cut its stock, about $0.2 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as FirstService Corporation (NASDAQ:FSV) but similarly valued. These stocks are Laureate Education, Inc. (NASDAQ:LAUR), Outfront Media Inc (NYSE:OUT), Chimera Investment Corporation (NYSE:CIM), and Mercury Systems Inc (NASDAQ:MRCY). All of these stocks’ market caps are closest to FSV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAUR | 34 | 360118 | 7 |
| OUT | 31 | 486631 | -2 |
| CIM | 14 | 123344 | 1 |
| MRCY | 24 | 50633 | 2 |
| Average | 25.75 | 255182 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $170 million in FSV’s case. Laureate Education, Inc. (NASDAQ:LAUR) is the most popular stock in this table. On the other hand Chimera Investment Corporation (NYSE:CIM) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks FirstService Corporation (NASDAQ:FSV) is even less popular than CIM. Hedge funds clearly dropped the ball on FSV as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on FSV as the stock returned -17.4% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
