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Hedge Funds Are Selling Formula One Group (FWONA)

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Formula One Group (NASDAQ:FWONA) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that FWONA isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Crispin Odey

Let’s check out the recent hedge fund action surrounding Formula One Group (NASDAQ:FWONA).

What does the smart money think about Formula One Group (NASDAQ:FWONA)?

Heading into the fourth quarter of 2018, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in FWONA heading into this year. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

FWONA_dec2018

The largest stake in Formula One Group (NASDAQ:FWONA) was held by Southeastern Asset Management, which reported holding $83.4 million worth of stock at the end of September. It was followed by Ancient Art (Teton Capital) with a $69.8 million position. Other investors bullish on the company included Odey Asset Management Group, CQS Cayman LP, and Ashe Capital.

Judging by the fact that Formula One Group (NASDAQ:FWONA) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of money managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Ryan Frick and Oliver Evans’s Dorsal Capital Management dropped the biggest stake of all the hedgies followed by Insider Monkey, totaling an estimated $21.2 million in stock, and Philippe Jabre’s Jabre Capital Partners was right behind this move, as the fund dumped about $1.4 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Formula One Group (NASDAQ:FWONA) but similarly valued. These stocks are Gol Linhas Aereas Inteligentes SA (NYSE:GOL), AerCap Holdings N.V. (NYSE:AER), Unum Group (NYSE:UNM), and The Western Union Company (NYSE:WU). This group of stocks’ market values match FWONA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOL 4 51989 -2
AER 22 1113940 -2
UNM 25 399209 1
WU 20 667767 -1
Average 17.75 558226 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $558 million. That figure was $310 million in FWONA’s case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 4 bullish hedge fund positions. Formula One Group (NASDAQ:FWONA) 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 UNM might be a better candidate to consider a long position.

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

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