Is BEN Stock A Buy or Sell?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Franklin Resources, Inc. (NYSE:BEN).

Is BEN stock a buy or sell? Hedge fund interest in Franklin Resources, Inc. (NYSE:BEN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare BEN to other stocks including FactSet Research Systems Inc. (NYSE:FDS), China Southern Airlines Co Ltd (NYSE:ZNH), and Molina Healthcare, Inc. (NYSE:MOH) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bernard Horn of Polaris Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to analyze the fresh hedge fund action encompassing Franklin Resources, Inc. (NYSE:BEN).

Do Hedge Funds Think BEN Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in BEN over the last 22 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of Franklin Resources, Inc. (NYSE:BEN), with a stake worth $55.9 million reported as of the end of December. Trailing Citadel Investment Group was Polaris Capital Management, which amassed a stake valued at $37.3 million. Fairfax Financial Holdings, Azora Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to Franklin Resources, Inc. (NYSE:BEN), around 1.99% of its 13F portfolio. Full18 Capital is also relatively very bullish on the stock, designating 1.85 percent of its 13F equity portfolio to BEN.

Because Franklin Resources, Inc. (NYSE:BEN) has witnessed falling interest from the smart money, logic holds that there were a few hedgies that decided to sell off their positions entirely by the end of the fourth quarter. It’s worth mentioning that David Abrams’s Abrams Capital Management sold off the largest position of all the hedgies tracked by Insider Monkey, comprising about $166.9 million in stock. Daniel Johnson’s fund, Gillson Capital, also said goodbye to its stock, about $20 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Franklin Resources, Inc. (NYSE:BEN). We will take a look at FactSet Research Systems Inc. (NYSE:FDS), China Southern Airlines Co Ltd (NYSE:ZNH), Molina Healthcare, Inc. (NYSE:MOH), Evergy, Inc. (NYSE:EVRG), Nuance Communications Inc. (NASDAQ:NUAN), Enel Americas S.A. (NYSE:ENIA), and ASE Technology Holding Co., Ltd. (NYSE:ASX). This group of stocks’ market values are closest to BEN’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $1152 million. That figure was $269 million in BEN’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Franklin Resources, Inc. (NYSE:BEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BEN is 56.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on BEN as the stock returned 21.8% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.