Yes, Hedge Funds Are Betting On FXCM Inc (FXCM)

FXCM Inc (NYSE:FXCM) has experienced an increase in hedge fund sentiment recently. This is important to pay attention to, because FXCM saw its estimates reduced by UBS earlier today. With many investors at a crossroads, let’s take a look at what the smart money thinks.

If you’d ask most traders, hedge funds are assumed to be unimportant, outdated financial tools of years past. While there are greater than 8000 funds trading today, we at Insider Monkey hone in on the masters of this club, about 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total asset base, and by monitoring their top equity investments, we have come up with a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as key, positive insider trading activity is a second way to break down the investments you’re interested in. There are plenty of reasons for a corporate insider to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this strategy if shareholders understand what to do (learn more here).

With these “truths” under our belt, we’re going to take a glance at the recent action regarding FXCM Inc (NYSE:FXCM).

How have hedgies been trading FXCM Inc (NYSE:FXCM)?

Heading into 2013, a total of 6 of the hedge funds we track were long in this stock, a change of 50% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially.

Of the funds we track, MFP Investors, managed by Michael Price, holds the most valuable position in FXCM Inc (NYSE:FXCM). MFP Investors has a $21.7 million position in the stock, comprising 3.1% of its 13F portfolio. On MFP Investors’s heels is Citadel Investment Group, managed by Ken Griffin, which held a $12.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Israel Englander’s Millennium Management, Mike Vranos’s Ellington and Paul Tudor Jones’s Tudor Investment Corp.

Consequently, key money managers have been driving this bullishness. MFP Investors, managed by Michael Price, created the biggest position in FXCM Inc (NYSE:FXCM). MFP Investors had 21.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.4 million position during the quarter. The following funds were also among the new FXCM investors: Mike Vranos’s Ellington and Paul Tudor Jones’s Tudor Investment Corp.

How have insiders been trading FXCM Inc (NYSE:FXCM)?

Bullish insider trading is at its handiest when the primary stock in question has seen transactions within the past 180 days. Over the latest six-month time period, FXCM Inc (NYSE:FXCM) has experienced 1 unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to FXCM Inc (NYSE:FXCM). These stocks are Interactive Brokers Group, Inc. (NASDAQ:IBKR), BGC Partners, Inc. (NASDAQ:BGCP), GFI Group Inc. (NYSE:GFIG), Piper Jaffray Companies (NYSE:PJC), and Medley Capital Corp (NYSE:MCC). This group of stocks are the members of the investment brokerage – national industry and their market caps are similar to FXCM’s market cap.