Fair Isaac Corporation (FICO): Hedge Funds Like What They See

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Fair Isaac Corporation (NYSE:FICO).

Is Fair Isaac Corporation (NYSE:FICO) an attractive stock to buy now? Money managers are getting more bullish. The number of bullish hedge fund bets rose by 9 recently. FICO was in 26 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with FICO holdings at the end of the June quarter. At the end of this article we will also compare FICO to other stocks including Woodward Inc (NASDAQ:WWD), BlackBerry Ltd (NASDAQ:BBRY), and Intercept Pharmaceuticals Inc (NASDAQ:ICPT) to get a better sense of its popularity.

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.

What have hedge funds been doing with Fair Isaac Corporation (NYSE:FICO)?

Heading into the fourth quarter of 2016, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a surge of 53% from one quarter earlier, pushing hedge fund ownership to a yearly high. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Fair Isaac Corporation (NYSE:FICO). According to regulatory filings, the fund has an $89 million position in the stock. The second largest stake is held by Scopia Capital, led by Matt Sirovich and Jeremy Mindich, holding an $88.5 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain John W. Rogers’ Ariel Investments, Cliff Asness’ AQR Capital Management, and David Stemerman’s Conatus Capital Management.

Now, key hedge funds have jumped into Fair Isaac Corporation (NYSE:FICO) headfirst. Gotham Asset Management, led by Joel Greenblatt, established the most valuable position in Fair Isaac Corporation (NYSE:FICO). According to regulatory filings, the fund had $8.7 million invested in the company at the end of the quarter. Millennium Management, one of the 10 largest hedge funds in the world, also made a $4.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Lee Ainslie’s Maverick Capital, Jason Young and Alfred Geary’s YG Partners, and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s check out hedge fund activity in other stocks similar to Fair Isaac Corporation (NYSE:FICO). These stocks are Woodward Inc (NASDAQ:WWD), Research In Motion Ltd (NASDAQ:BBRY), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and Morningstar, Inc. (NASDAQ:MORN). This group of stocks’ market values are similar to FICO’s market value.

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 $391 million. That figure was $362 million in FICO’s case. BlackBerry Ltd (NASDAQ:BBRY) is the most popular stock in this table. On the other hand Woodward Inc (NASDAQ:WWD) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Fair Isaac Corporation (NYSE:FICO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None