Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Fortune Brands Home & Security Inc (NYSE:FBHS) has seen an increase in activity from the world’s largest hedge funds of late. FBHS was in 18 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with FBHS holdings at the end of the previous quarter. At the end of this article we will also compare FBHS to other stocks including Buckeye Partners, L.P. (NYSE:BPL), iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), and AerCap Holdings N.V. (NYSE:AER) to get a better sense of its popularity.
Follow Fortune Brands Innovations Inc. (NYSE:FBIN)
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In the eyes of most traders, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are more than an 8000 funds with their doors open at the moment, We hone in on the leaders of this club, approximately 700 funds. These hedge fund managers administer the majority of the smart money’s total capital, and by shadowing their unrivaled stock picks, Insider Monkey has identified many investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to check out the new action surrounding Fortune Brands Home & Security Inc (NYSE:FBHS).
Hedge fund activity in Fortune Brands Home & Security Inc (NYSE:FBHS)
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Fortune Brands Home & Security Inc (NYSE:FBHS). GAMCO Investors has a $85.1 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund is Christopher James’ Partner Fund Management, with a $48.3 million position; 1.4% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish include Clint Murray’s Lodge Hill Capital, Steve Cohen’s Point72 Asset Management and Richard Chilton’s Chilton Investment Company.
As aggregate interest increased, specific money managers have jumped into Fortune Brands Home & Security Inc (NYSE:FBHS) headfirst. Partner Fund Management created the largest position in Fortune Brands Home & Security Inc (NYSE:FBHS). Min Htoo and Jordan Teramo’s Anandar Capital Management also initiated a $9.2 million position during the quarter. The following funds were also among the new FBHS investors: Andrew Sandler’s Sandler Capital Management, Gregg Moskowitz’s Interval Partners, and D. E. Shaw’s D E Shaw.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Fortune Brands Home & Security Inc (NYSE:FBHS) but similarly valued. These stocks are Buckeye Partners, L.P. (NYSE:BPL), iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), AerCap Holdings N.V. (NYSE:AER), and Staples, Inc. (NASDAQ:SPLS). All of these stocks’ market caps are closest to FBHS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BPL | 15 | 71831 | 4 |
| IBB | 19 | 321116 | 8 |
| AER | 77 | 2994191 | 0 |
| SPLS | 54 | 1338302 | 7 |
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1.18 billion, compared to $214 million in FBHS’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Buckeye Partners, L.P. (NYSE:BPL) is the least popular one with only 15 bullish hedge fund positions. Fortune Brands Home & Security Inc (NYSE:FBHS) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AER might be a better candidate to consider for a long position.
