Is First Cash Financial Services, Inc. (FCFS) A Good Stock To Buy?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending on October 30. Sixty-three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of First Cash Financial Services, Inc. (NASDAQ:FCFS).

First Cash Financial Services, Inc. (NASDAQ:FCFS) investors should pay attention to a decrease in hedge fund sentiment recently. FCFS was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 12 hedge funds in our database with FCFS 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 FirstService Corporation (TSE:FSV), Axiall Corp (NYSE:AXLL), and Benchmark Electronics, Inc. (NYSE:BHE) to gather more data points.

If you’d ask most shareholders, hedge funds are viewed as worthless, old financial vehicles of years past. While there are over 8000 funds with their doors open at present, we choose to focus on the upper echelon of this group, approximately 700 funds. These money managers oversee bulk of the hedge fund industry’s total capital, and by observing their top stock picks, Insider Monkey has spotted numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to analyze the key action encompassing First Cash Financial Services, Inc. (NASDAQ:FCFS).

What does the smart money think about First Cash Financial Services, Inc. (NASDAQ:FCFS)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the number one position in First Cash Financial Services, Inc. (NASDAQ:FCFS). Nantahala Capital Management has a $28.2 million position in the stock, comprising 3.8% of its 13F portfolio. On Nantahala Capital Management’s heels is Prince Street Capital Management, led by David Halpert, holding a $7.9 million position; the fund has 5% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Constantinos J. Christofilis’s Archon Capital Management, Ken Griffin’s Citadel Investment Group and Jim Simons’s Renaissance Technologies.

Seeing as First Cash Financial Services, Inc. (NASDAQ:FCFS) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of money managers that slashed their full holdings last quarter. At the top of the heap, Joel Greenblatt’s Gotham Asset Management dropped the biggest position of the 700 funds tracked by Insider Monkey, comprising an estimated $0.6 million in stock. Chao Ku’s fund, Nine Chapters Capital Management, also said goodbye to its stock, about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 fund last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Cash Financial Services, Inc. (NASDAQ:FCFS) but similarly valued. These stocks are FirstService Corporation (TSE:FSV), Axiall Corp (NYSE:AXLL), Benchmark Electronics, Inc. (NYSE:BHE), and Emergent Biosolutions Inc (NYSE:EBS). This group of stocks’ market caps match FCFS’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $54 million in FCFS’s case. Axiall Corp (NYSE:AXLL) is the most popular stock in this table. On the other hand, FirstService Corporation (TSE:FSV) is the least popular one with only 5 bullish hedge fund positions. Although First Cash Financial Services, Inc. (NASDAQ:FCFS) is not the least popular, it has not attracted much attention from investors. This may indicate not being a good choice for investment, which is why we’d rather spend our time researching stocks that that hedge funds are collectively most bullish on. In this particular case, AXLL might be worth considering and further analyzing.