Carillon Tower Thinks that Concerns Surrounding Fair Isaac (FICO) are ‘Overblown’

Carillon Tower Advisers, an investment management firm, published its “Carillon Eagle Mid Cap Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. The Russell Midcap® Growth Index (down 0.76%) marginally outperformed its Russell Midcap® Value Index (down 1.01%) counterpart. Individual sectors across the Russell Midcap Growth were largely mixed, with financials (up 6.83%), real estate (up 4.05%), and information technology (up 2.15%) leading the way. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Carillon Tower Advisers, in its Q3 2021 investor letter, mentioned Fair Isaac Corporation (NYSE: FICO) and discussed its stance on the firm. Fair Isaac Corporation is a San Jose, California-based data analytics company with a $10.7 billion market capitalization. FICO delivered a -25.60% return since the beginning of the year, while its 12-month returns are down by -11.68%. The stock closed at $380.20 per share on November 5, 2021.

Here is what Carillon Tower Advisers has to say about Fair Isaac Corporation in its Q3 2021 investor letter:

Fair Isaac Corporation (FICO) provides predictive analytics and data management products and services that enable business to automate, improve, and connect decisions. The stock underperformed in the quarter despite posting solid earnings. The recent pressure in the firm’s shares stems from investor concerns that FICO could see a dramatic slowdown in its mortgage business due to intrusion from a competitor as well as the potential for further rising interest rates. At the moment, we feel as though these concerns are overblown and continue to hold the stock.”

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Based on our calculations, Fair Isaac Corporation (NYSE: FICO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. FICO was in 28 hedge fund portfolios at the end of the first half of 2021, compared to 27 funds in the previous quarter. Fair Isaac Corporation (NYSE: FICO) delivered a -19.09% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Disclosure: None. This article is originally published at Insider Monkey.