Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
In this article, we are going to take a closer look at the hedge fund sentiment towards Fidelity & Guaranty Life (NYSE:FGL). Overall, the sentiment was flat at the end of the last quarter. This is usually a negative indicator. At the end of this article we will also compare FGL to other stocks including The St. Joe Company (NYSE:JOE), Group 1 Automotive, Inc. (NYSE:GPI), and ServisFirst Bancshares, Inc. (NASDAQ:SFBS) to get a better sense of its popularity.
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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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Keeping this in mind, let’s go over the new action encompassing Fidelity & Guaranty Life (NYSE:FGL).
How are hedge funds trading Fidelity & Guaranty Life (NYSE:FGL)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged over the quarter. The graph below displays the number of hedge funds with bullish position in FGL over the last five quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alpine Associates, led by Robert Emil Zoellner, holds the largest position in Fidelity & Guaranty Life (NYSE:FGL). Alpine Associates has a $54 million position in the stock, comprising 2% of its 13F portfolio. On Alpine Associates’s heels is Gordy Holterman and Derek Dunn of Overland Advisors, with a $27.3 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism consist of Alec Litowitz and Ross Laser’s Magnetar Capital, Renaissance Technologies, one of the largest hedge funds in the world and Thomas Steyer’s Farallon Capital. 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.
Due to the fact that Fidelity & Guaranty Life (NYSE:FGL) has encountered bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few fund managers that slashed their full holdings last quarter. Intriguingly, James Dondero’s Highland Capital Management cut the biggest investment of all the investors tracked by Insider Monkey, totaling close to $6.1 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund sold off about $1.1 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to Fidelity & Guaranty Life (NYSE:FGL). These stocks are The St. Joe Company (NYSE:JOE), Group 1 Automotive, Inc. (NYSE:GPI), ServisFirst Bancshares, Inc. (NASDAQ:SFBS), and Acceleron Pharma Inc (NASDAQ:XLRN). All of these stocks’ market caps are closest to FGL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JOE | 12 | 483899 | 3 |
| GPI | 19 | 283041 | -1 |
| SFBS | 6 | 12089 | 1 |
| XLRN | 22 | 158390 | 1 |
As you can see these stocks had an average of 15 funds with bullish positions and the average amount invested in these stocks was $234 million, versus $107 million in FGL’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is the least popular one with only six bullish hedge fund positions. Fidelity & Guaranty Life (NYSE:FGL) 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 Acceleron Pharma Inc (NASDAQ:XLRN) might be a better candidate to consider taking a long position in.
Disclosure: none
