Is Fox Factory Holding Corp (FOXF) Going to Burn Its Backers?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Fox Factory Holding Corp (NASDAQ:FOXF).

Is Fox Factory Holding Corp (NASDAQ:FOXF) an outstanding stock to buy at the moment? Investors who are in the know are altogether becoming more confident. The number of bullish hedge fund positions improved by 2 lately. 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 SPX Corporation (NYSE:SPXC), Wingstop Inc (NASDAQ:WING), and ICF International Inc (NASDAQ:ICFI) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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What does the smart money think about Fox Factory Holding Corp (NASDAQ:FOXF)?

Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a 29% increase from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in FOXF heading into this year, which has also increased by 29% since then. So, let’s check out 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, Chuck Royce’s Royce & Associates has the largest position in Fox Factory Holding Corp (NASDAQ:FOXF), worth close to $6.3 million. The second largest stake is held by Richard Driehaus of Driehaus Capital, with a $3.6 million position. Some other hedge funds and institutional investors that hold long positions consist of Charles Paquelet’s Skylands Capital, Roger Ibbotson’s Zebra Capital Management, and Peter Muller’s PDT Partners. 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-micro-cap stocks.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Driehaus Capital initiated the most valuable position in Fox Factory Holding Corp (NASDAQ:FOXF). Matthew Hulsizer’s PEAK6 Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new FOXF position was Cliff Asness’ AQR Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Fox Factory Holding Corp (NASDAQ:FOXF) but similarly valued. We will take a look at SPX Corporation (NYSE:SPXC), Wingstop Inc (NASDAQ:WING), ICF International Inc (NASDAQ:ICFI), and AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG). All of these stocks’ market caps resemble FOXF’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $17 million in FOXF’s case. AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) is the most popular stock in this table. On the other hand Wingstop Inc (NASDAQ:WING) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Fox Factory Holding Corp (NASDAQ:FOXF) is even less popular than WING. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

Disclosure: None