Hedge Funds Are Selling Franks International NV (FI)

Is Franks International NV (NYSE:FI) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Franks International NV (NYSE:FI) investors should pay attention to a decrease in hedge fund interest lately. Our calculations also showed that FI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action regarding Franks International NV (NYSE:FI).

What have hedge funds been doing with Franks International NV (NYSE:FI)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in FI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Balyasny Asset Management was the largest shareholder of Franks International NV (NYSE:FI), with a stake worth $7.9 million reported as of the end of September. Trailing Balyasny Asset Management was Millennium Management, which amassed a stake valued at $4.4 million. Adage Capital Management, First Pacific Advisors, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Balyasny Asset Management allocated the biggest weight to Franks International NV (NYSE:FI), around 0.05% of its 13F portfolio. First Pacific Advisors is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to FI.

Because Franks International NV (NYSE:FI) has faced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies who were dropping their entire stakes in the third quarter. Interestingly, Josh Donfeld and David Rogers’s Castle Hook Partners dumped the biggest position of the 750 funds watched by Insider Monkey, totaling an estimated $0.9 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund dropped about $0.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Franks International NV (NYSE:FI). These stocks are First Bancorp (NASDAQ:FBNC), Navigant Consulting, Inc. (NYSE:NCI), The E.W. Scripps Company (NASDAQ:SSP), and MTS Systems Corporation (NASDAQ:MTSC). This group of stocks’ market values match FI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBNC 15 84801 1
NCI 16 110997 5
SSP 17 132414 0
MTSC 18 120517 6
Average 16.5 112182 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $23 million in FI’s case. MTS Systems Corporation (NASDAQ:MTSC) is the most popular stock in this table. On the other hand First Bancorp (NASDAQ:FBNC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Franks International NV (NYSE:FI) is even less popular than FBNC. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on FI, though not to the same extent, as the stock returned 7.4% during the fourth quarter (through 11/30) and outperformed the market as well.

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