Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Franco-Nevada Corporation (NYSE:FNV) to find out whether it was one of their high conviction long-term ideas.
Franco-Nevada Corporation (NYSE:FNV) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as DexCom, Inc. (NASDAQ:DXCM), Robert Half International Inc. (NYSE:RHI), and CIT Group Inc. (NYSE:CIT) to gather more data points.
In the financial world, there is a multitude of methods market participants put to use to assess stocks. A pair of the best methods is composed of hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outclass their index-focused peers by a solid margin (see the details here).
Now, let’s take a peek at the recent action regarding Franco-Nevada Corporation (NYSE:FNV).
What have hedge funds been doing with Franco-Nevada Corporation (NYSE:FNV)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Franco-Nevada Corporation (NYSE:FNV). AQR Capital Management has a $36.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Chuck Royce of Royce & Associates, with a $33 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Jim Simons’s Renaissance Technologies, Murray Stahl’s Horizon Asset Management and Eric Sprott’s Sprott Asset Management.
Judging by the fact that Franco-Nevada Corporation (NYSE:FNV) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of money managers who sold off their entire stakes heading into Q4. Intriguingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. cut the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $3.1 million in stock, and Mark Broach’s Manatuck Hill Partners was right behind this move, as the fund dropped about $1.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 fund heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Franco-Nevada Corporation (NYSE:FNV) but similarly valued. We will take a look at DexCom, Inc. (NASDAQ:DXCM), Robert Half International Inc. (NYSE:RHI), CIT Group Inc. (NYSE:CIT), and Westlake Chemical Corporation (NYSE:WLK). This group of stocks’ market values are similar to FNV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DXCM | 30 | 362181 | 5 |
| RHI | 28 | 225667 | 1 |
| CIT | 28 | 1278831 | -5 |
| WLK | 28 | 767619 | -3 |
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $659 million. That figure was $477 million in FNV’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table, while the other 3 stocks (RHI, CIT, WLK) share the same popularity. With only 15 bullish hedge fund positions, Franco-Nevada Corporation (NYSE:FNV) is the least popular stock in this group. To comprehend why the smart money isn’t behind this stock, further detailed analyses are needed. This doesn’t necessarily mean it is a stock not worth buying, it is possible that investors found it overvalued because they weren’t considering the bullish thesis. In any case, more research is advisable.
