Is FirstCash, Inc. (FCFS) Worthy of Your Portfolio?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards FirstCash, Inc. (NASDAQ:FCFS).

FirstCash, Inc. (NASDAQ:FCFS) witnessed an increase in enthusiasm from smart money tracked by Insider Monkey last quarter. At the end of September 14 funds held shares of the company. However, 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 Lakeland Financial Corporation (NASDAQ:LKFN), Shenandoah Telecommunications Company (NASDAQ:SHEN), and Petrobras Argentina SA ADR (NYSE:PZE) to gather more data points.

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.

cowardlion/shutterstock.com

With all of this in mind, let’s check out the latest action surrounding FirstCash, Inc. (NASDAQ:FCFS).

Hedge fund activity in FirstCash, Inc. (NASDAQ:FCFS)

At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, compared to nine funds at the end of June. The graph below displays the number of hedge funds with bullish position in FCFS over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management has the number one position in FirstCash, Inc. (NASDAQ:FCFS), worth close to $38.7 million, accounting for 4.7% of its total 13F portfolio. The second most bullish fund manager is Amy Minella of Cardinal Capital, with a $37.2 million position; 1.7% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism contain Renaissance Technologies, one of the largest hedge funds in the world, Israel Englander’s Millennium Management, and David Halpert’s Prince Street Capital Management. We should note that Nantahala Capital Management is 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 money managers were breaking ground themselves. Nantahala Capital Management created the largest position in First Cash Financial Services, Inc. (NASDAQ:FCFS). Amy Minella’s Cardinal Capital also made a $37.2 million investment in the stock during the quarter.

Let’s check out hedge fund activity in other stocks similar to FirstCash, Inc. (NASDAQ:FCFS). We will take a look at Lakeland Financial Corporation (NASDAQ:LKFN), Shenandoah Telecommunications Company (NASDAQ:SHEN), Petrobras Argentina SA ADR (NYSE:PZE), and Barracuda Networks Inc (NYSE:CUDA). This group of stocks’ market valuations match FCFS’s market valuation.

As you can see these stocks had an average of 11 funds with bullish positions and the average amount invested in these stocks was $30 million, versus $146 million in FCFS’s case. Barracuda Networks Inc (NYSE:CUDA) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only eight bullish hedge fund positions. First Cash Financial Services, Inc. (NASDAQ:FCFS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Barracuda Networks Inc (NYSE:CUDA) might be a better candidate to consider taking a long position in.

Disclosure: none