In this article we will analyze whether Franco-Nevada Corporation (NYSE:FNV) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is FNV a good stock to buy now? Franco-Nevada Corporation (NYSE:FNV) shareholders have witnessed an increase in enthusiasm from smart money recently. Franco-Nevada Corporation (NYSE:FNV) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 23 hedge funds in our database with FNV positions at the end of the second quarter. Our calculations also showed that FNV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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.
Eric Sprott of Sprott Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we’re going to check out the recent hedge fund action encompassing Franco-Nevada Corporation (NYSE:FNV).
Do Hedge Funds Think FNV Is A Good Stock To Buy Now?
At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FNV over the last 21 quarters. So, let’s review 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, Renaissance Technologies has the most valuable position in Franco-Nevada Corporation (NYSE:FNV), worth close to $747.3 million, amounting to 0.7% of its total 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $258.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Eric Sprott’s Sprott Asset Management, Murray Stahl’s Horizon Asset Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to Franco-Nevada Corporation (NYSE:FNV), around 5.3% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, dishing out 5.21 percent of its 13F equity portfolio to FNV.
As aggregate interest increased, key hedge funds were breaking ground themselves. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, created the largest position in Franco-Nevada Corporation (NYSE:FNV). Waratah Capital Advisors had $22.8 million invested in the company at the end of the quarter. Daniel Lascano’s Lomas Capital Management also made a $11.7 million investment in the stock during the quarter. The other funds with brand new FNV positions are Doug Silverman and Alexander Klabin’s Senator Investment Group, Matthew Hulsizer’s PEAK6 Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Franco-Nevada Corporation (NYSE:FNV). We will take a look at The Clorox Company (NYSE:CLX), Ford Motor Company (NYSE:F), Carrier Global Corporation (NYSE:CARR), Hormel Foods Corporation (NYSE:HRL), The Kroger Co. (NYSE:KR), American Water Works Company, Inc. (NYSE:AWK), and HP Inc. (NYSE:HPQ). This group of stocks’ market values are similar to FNV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLX | 39 | 1898007 | 3 |
| F | 38 | 1079806 | 8 |
| CARR | 49 | 1880405 | 5 |
| HRL | 30 | 555456 | 3 |
| KR | 35 | 2470150 | -6 |
| AWK | 31 | 679131 | 1 |
| HPQ | 41 | 1114928 | 6 |
| Average | 37.6 | 1382555 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1383 million. That figure was $1519 million in FNV’s case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 30 bullish hedge fund positions. Franco-Nevada Corporation (NYSE:FNV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FNV is 42.6. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately FNV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FNV investors were disappointed as the stock returned -4.7% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Franco Nevada Corp (NYSE:FNV)
Follow Franco Nevada Corp (NYSE:FNV)
Disclosure: None. This article was originally published at Insider Monkey.
