It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Federal Signal Corporation (NYSE:FSS).
Federal Signal Corporation (NYSE:FSS) was in 17 hedge funds’ portfolios at the end of the third quarter of 2015. FSS has seen a decrease in hedge fund interest in recent months. There were 19 hedge funds in our database with FSS holdings at the end of the previous quarter. 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 Teladoc Inc (NYSE:TDOC), Pretium Resources Inc (NYSE:PVG), and FTD Companies Inc (NASDAQ:FTD) to gather more data points.
Follow Federal Signal Corp (NYSE:FSS)
Follow Federal Signal Corp (NYSE:FSS)
Today there are a lot of signals stock market investors use to size up their stock investments. Some of the most useful signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite fund managers can outperform the broader indices by a very impressive margin (see the details here).
With all of this in mind, we’re going to take a look at the new action encompassing Federal Signal Corporation (NYSE:FSS).
Hedge fund activity in Federal Signal Corporation (NYSE:FSS)
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, down by 11% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in Federal Signal Corporation (NYSE:FSS). The fund reportedly holds an $87.3 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, holding a $12.3 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions contain Joel Greenblatt’s Gotham Asset Management, Robert B. Gillam’s McKinley Capital Management and Israel Englander’s Millennium Management.
Due to the fact that Federal Signal Corporation (NYSE:FSS) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that slashed their full holdings heading into Q4. It’s worth mentioning that Neil Chriss’s Hutchin Hill Capital dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $1 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dropped its call options, about $0.4 million worth of. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Federal Signal Corporation (NYSE:FSS) but similarly valued. These stocks are Teladoc Inc (NYSE:TDOC), Pretium Resources Inc (NYSE:PVG), FTD Companies Inc (NASDAQ:FTD), and Caesars Entertainment Corp (NASDAQ:CZR). All of these stocks’ market caps resemble FSS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TDOC | 14 | 96972 | 12 |
| PVG | 12 | 73523 | 0 |
| FTD | 20 | 123144 | 4 |
| CZR | 23 | 254293 | 1 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $134 million in FSS’s case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table, while Pretium Resources Inc (NYSE:PVG) is the least laggard with only 12 bullish hedge fund positions. Federal Signal Corporation (NYSE:FSS) 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 CZR might be a better candidate to consider a long position.
