Is Franklin Resources, Inc. (NYSE:BEN) a good investment now? Prominent investors are getting more optimistic. The number of long hedge fund positions increased by 2 lately. The company also saw its numbers made more bullish at Jefferies earlier this morning, so it’s worth paying attention to what the smart money thinks.
According to most stock holders, hedge funds are perceived as unimportant, old financial vehicles of years past. While there are greater than 8000 funds in operation at the moment, we hone in on the bigwigs of this club, about 450 funds. Most estimates calculate that this group oversees the majority of all hedge funds’ total asset base, and by watching their top stock picks, we have formulated a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced 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 topped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).
Just as beneficial, optimistic insider trading activity is another way to break down the financial markets. As the old adage goes: there are a number of incentives for a corporate insider to drop shares of his or her company, but only one, very obvious reason why they would buy. Several academic studies have demonstrated the market-beating potential of this method if you know what to do (learn more here).
Now, we’re going to take a look at the latest action surrounding Franklin Resources, Inc. (NYSE:BEN).
What have hedge funds been doing with Franklin Resources, Inc. (NYSE:BEN)?
Heading into 2013, a total of 29 of the hedge funds we track were bullish in this stock, a change of 7% from the previous quarter. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably.
When looking at the hedgies we track, Mason Hawkins’s Southeastern Asset Management had the biggest position in Franklin Resources, Inc. (NYSE:BEN), worth close to $510 million, comprising 2.2% of its total 13F portfolio. The second largest stake is held by Richard S. Pzena of Pzena Investment Management, with a $169 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include David Winters’s Wintergreen Advisers, Ricky Sandler’s Eminence Capital and John W. Rogers’s Ariel Investments.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Ascend Capital, managed by Malcolm Fairbairn, assembled the most valuable position in Franklin Resources, Inc. (NYSE:BEN). Ascend Capital had 7 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $5 million position during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson’s Adage Capital Management, Ray Dalio’s Bridgewater Associates, and David Costen Haley’s HBK Investments.
How have insiders been trading Franklin Resources, Inc. (NYSE:BEN)?
Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has experienced transactions within the past six months. Over the last six-month time period, Franklin Resources, Inc. (NYSE:BEN) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Franklin Resources, Inc. (NYSE:BEN). These stocks are T. Rowe Price Group, Inc. (NASDAQ:TROW), The Blackstone Group L.P. (NYSE:BX), BlackRock, Inc. (NYSE:BLK), State Street Corporation (NYSE:STT), and The Bank of New York Mellon Corporation (NYSE:BK). This group of stocks belong to the asset management industry and their market caps match BEN’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|T. Rowe Price Group, Inc. (NASDAQ:TROW)||24||0||3|
|The Blackstone Group L.P. (NYSE:BX)||22||0||2|
|BlackRock, Inc. (NYSE:BLK)||27||2||6|
|State Street Corporation (NYSE:STT)||39||0||7|
|The Bank of New York Mellon Corporation (NYSE:BK)||36||0||9|
With the returns exhibited by the aforementioned time-tested strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and Franklin Resources, Inc. (NYSE:BEN) applies perfectly to this mantra.