Fair Isaac Corporation (FICO): Are Hedge Funds Right About This Stock?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Fair Isaac Corporation (NYSE:FICO)? The smart money sentiment can provide an answer to this question.

Is Fair Isaac Corporation (NYSE:FICO) a good investment today? Money managers were getting more optimistic. The number of bullish hedge fund bets increased by 9 recently. Fair Isaac Corporation (NYSE:FICO) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that FICO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a gander at the recent hedge fund action encompassing Fair Isaac Corporation (NYSE:FICO).

Michael Lowenstein Kensico Capital

Michael Lowenstein of Kensico Capital

Do Hedge Funds Think FICO Is A Good Stock To Buy Now?

At third quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 32% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in FICO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Fair Isaac Corporation (NYSE:FICO) was held by Valley Forge Capital, which reported holding $288.4 million worth of stock at the end of September. It was followed by Melvin Capital Management with a $159.2 million position. Other investors bullish on the company included Ako Capital, Melvin Capital Management, and Kensico Capital. In terms of the portfolio weights assigned to each position Valley Forge Capital allocated the biggest weight to Fair Isaac Corporation (NYSE:FICO), around 11.46% of its 13F portfolio. Heard Capital is also relatively very bullish on the stock, designating 10.3 percent of its 13F equity portfolio to FICO.

As aggregate interest increased, key money managers have jumped into Fair Isaac Corporation (NYSE:FICO) headfirst. Kensico Capital, managed by Michael Lowenstein, created the most outsized position in Fair Isaac Corporation (NYSE:FICO). Kensico Capital had $58.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $21.9 million position during the quarter. The other funds with brand new FICO positions are Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw, and Brandon Haley’s Holocene Advisors.

Let’s also examine hedge fund activity in other stocks similar to Fair Isaac Corporation (NYSE:FICO). We will take a look at Black Knight, Inc. (NYSE:BKI), Snap-on Incorporated (NYSE:SNA), Targa Resources Corp (NYSE:TRGP), Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation (NYSE:UWMC), Morningstar, Inc. (NASDAQ:MORN), and Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR). This group of stocks’ market values match FICO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKI 38 775299 5
SNA 29 551227 -2
TRGP 26 567252 0
RHI 27 318494 4
UWMC 16 32122 -4
MORN 26 1645201 2
EBR 6 3756 1
Average 24 556193 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $1004 million in FICO’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is the least popular one with only 6 bullish hedge fund positions. Fair Isaac Corporation (NYSE:FICO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FICO is 83.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately FICO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FICO were disappointed as the stock returned -11.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Follow Fair Isaac Corp (NYSE:FICO)

Suggested Articles:

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