Is FutureFuel Corp. (FF) Worthy of Your Portfolio?

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.

In this article, we are going to take a closer look at what smart money investors from our database think about FutureFuel Corp. (NYSE:FF). Overall, the hedge fund interest towards the stock was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FF to other stocks including Hortonworks Inc (NASDAQ:HDP), Editas Medicine Inc (NASDAQ:EDIT), and Live Oak Bancshares Inc (NASDAQ:LOB) 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.

With all of this in mind, let’s analyze the latest action encompassing FutureFuel Corp. (NYSE:FF).

What have hedge funds been doing with FutureFuel Corp. (NYSE:FF)?

Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in FutureFuel Corp. (NYSE:FF), unchanged over the quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in FF at the beginning of this year. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the most valuable position in FutureFuel Corp. (NYSE:FF). Renaissance Technologies has a $16.2 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is Chuck Royce’s Royce & Associates, with a $14.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish include Cliff Asness’ AQR Capital Management, John W. Rogers’ Ariel Investments, and John Overdeck and David Siegel’s Two Sigma Advisors. 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-microcap stocks.

Because FutureFuel Corp. (NYSE:FF) has weathered falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers who were dropping their full holdings in the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cashed in the largest stake of all the investors watched by Insider Monkey, worth about $1.6 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund sold off about $0.1 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as FutureFuel Corp. (NYSE:FF) but similarly valued. We will take a look at Hortonworks Inc (NASDAQ:HDP), Editas Medicine Inc (NASDAQ:EDIT), Live Oak Bancshares Inc (NASDAQ:LOB), and Bristow Group Inc (NYSE:BRS). This group of stocks’ market values are similar to FF’s market value.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $99 million, which is higher than the $42 million figure in FF’s case. Bristow Group Inc (NYSE:BRS) is the most popular stock in this table. On the other hand Live Oak Bancshares Inc (NASDAQ:LOB) is the least popular one with only four funds having reported long positions. FutureFuel Corp. (NYSE:FF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Bristow Group Inc (NYSE:BRS) might be a better candidate to consider taking a long position in.

Disclosure: none