Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s view the fresh action encompassing FirstService Corp (NASDAQ:FSV).
What have hedge funds been doing with FirstService Corp (NASDAQ:FSV)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FSV over the last 5 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Matthew A. Weatherbie of Weatherbie Capital holds the most valuable position in FirstService Corp (NASDAQ:FSV). Weatherbie Capital has a $32.8 million position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, holding a $27.4 million position. Other peers with similar optimism encompass Leon Lowenstein’s Lionstone Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Chuck Royce’s Royce & Associates. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, key hedge funds have been driving this bullishness. Israel Englander of Millennium Management initiated the biggest position in FirstService Corp (FSV). Millennium Management had $0.3 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as FirstService Corp but similarly valued. These stocks are Fabrinet (NYSE:FN), NxStage Medical, Inc. (NASDAQ:NXTM), Northwest Bancshares, Inc. (NASDAQ:NWBI), and Government Properties Income Trust (NYSE:GOV). This group of 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 |
|---|---|---|---|
| FN | 23 | 205977 | 5 |
| NXTM | 26 | 322856 | -1 |
| NWBI | 8 | 36251 | 1 |
| GOV | 6 | 89783 | 0 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $112 million in FSV’s case. NxStage Medical, Inc. (NASDAQ:NXTM) is the most popular stock in this table. On the other hand Government Properties Income Trust (NYSE:GOV) is the least popular one with only 6 bullish hedge fund positions. FirstService Corp (NASDAQ:FSV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NXTM might be a better candidate to consider taking a long position in.
Disclosure: None
