Is Finish Line Inc (FINL) Going to Burn These Hedge Funds?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Finish Line Inc (NASDAQ:FINL) was in 21 hedge funds’ portfolios at the end of September. Hedge fund interest in  FINL shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FINL to other stocks including Chesapeake Utilities Corporation (NYSE:CPK), ScanSource, Inc. (NASDAQ:SCSC), and Brooks Automation, Inc. (USA) (NASDAQ:BRKS) to get a better sense of its popularity.

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.

What does the smart money think about Finish Line Inc (NASDAQ:FINL)?

Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in FINL heading into this year. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Point72 Asset Management, led by Steve Cohen, holds the biggest position in Finish Line Inc (NASDAQ:FINL). Point72 Asset Management has a $5.8 million position in the stock. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $3 million position. Other members of the smart money that are bullish comprise Ken Grossman and Glen Schneider’s SG Capital Management, Neil Chriss’ Hutchin Hill Capital and Joel Greenblatt’s Gotham Asset Management. We should note that SG Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Finish Line Inc (NASDAQ:FINL) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Gregg Moskowitz’s Interval Partners cut the biggest stake of all the investors monitored by Insider Monkey, valued at about $16.2 million in stock. D E Shaw, also dropped its stock, about $7.8 million worth.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Finish Line Inc (NASDAQ:FINL) but similarly valued. These stocks are Chesapeake Utilities Corporation (NYSE:CPK), ScanSource, Inc. (NASDAQ:SCSC), Brooks Automation, Inc. (USA) (NASDAQ:BRKS), and HudBay Minerals Inc Ord Shs (NYSE:HBM). All of these stocks’ market caps are similar to FINL’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $29 million in FINL’s case. ScanSource, Inc. (NASDAQ:SCSC) is the most popular stock in this table. On the other hand HudBay Minerals Inc Ord Shs (NYSE:HBM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Finish Line Inc (NASDAQ:FINL) 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