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Should You Avoid Franklin Financial Corp (FRNK)?

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Franklin Financial Corp (NASDAQ:FRNK) has experienced a decrease in activity from the world’s largest hedge funds of late.

To most market participants, hedge funds are viewed as underperforming, old financial tools of years past. While there are over 8000 funds trading at present, we choose to focus on the upper echelon of this club, close to 450 funds. It is widely believed that this group controls the majority of all hedge funds’ total asset base, and by tracking their highest performing picks, we have unsheathed a number of investment strategies that have historically outperformed the S&P 500 index. 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 started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (see the details here).

Michael Price

Equally as beneficial, bullish insider trading activity is another way to break down the financial markets. There are a number of incentives for a corporate insider to sell shares of his or her company, but only one, very simple reason why they would buy. Many empirical studies have demonstrated the valuable potential of this strategy if piggybackers know where to look (learn more here).

Keeping this in mind, it’s important to take a glance at the latest action encompassing Franklin Financial Corp (NASDAQ:FRNK).

What does the smart money think about Franklin Financial Corp (NASDAQ:FRNK)?

At year’s end, a total of 5 of the hedge funds we track held long positions in this stock, a change of -17% from the third quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully.

Of the funds we track, MFP Investors, managed by Michael Price, holds the biggest position in Franklin Financial Corp (NASDAQ:FRNK). MFP Investors has a $11.8 million position in the stock, comprising 1.7% of its 13F portfolio. The second largest stake is held by Ryan Heslop and Ariel Warszawski of Firefly Value Partners, with a $6.3 million position; 0.9% of its 13F portfolio is allocated to the company. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors.

Seeing as Franklin Financial Corp (NASDAQ:FRNK) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of fund managers that elected to cut their entire stakes last quarter. Interestingly, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dumped the largest investment of all the hedgies we key on, totaling close to $1.1 million in stock., and D. E. Shaw of D E Shaw was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.

Insider trading activity in Franklin Financial Corp (NASDAQ:FRNK)

Insider purchases made by high-level executives is at its handiest when the company we’re looking at has experienced transactions within the past 180 days. Over the latest six-month time period, Franklin Financial Corp (NASDAQ:FRNK) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Franklin Financial Corp (NASDAQ:FRNK). These stocks are Farmers Capital Bank Corp (NASDAQ:FFKT), S.Y. Bancorp, Inc. (NASDAQ:SYBT), MidSouth Bancorp, Inc. (NYSEAMEX:MSL), The Bank of Kentucky Financial Corp (NASDAQ:BKYF), and CenterState Banks Inc (NASDAQ:CSFL). This group of stocks are the members of the regional – southeast banks industry and their market caps resemble FRNK’s market cap.

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