Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Ferro Corporation (NYSE:FOE) .
Ferro Corporation (NYSE:FOE) was included in the equity portfolios of 23 funds tracked by Insider Monkey at the end of September. FOE investors should be aware of a decrease in hedge fund interest in recent months, as there had been 28 funds with FOE holdings at the end of the previous quarter. At the end of this article we will also compare FOE to other stocks including Summit Hotel Properties Inc (NYSE:INN), TTM Technologies, Inc. (NASDAQ:TTMI), and Gentherm Inc (NASDAQ:THRM) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, we’re going to take a peek at the new action encompassing Ferro Corporation (NYSE:FOE).
How have hedgies been trading Ferro Corporation (NYSE:FOE)?
At the end of the third quarter, a total of 23 funds tracked by Insider Monkey held long positions in this stock, down by 18% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in FOE at the beginning of 2016. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the largest position in Ferro Corporation (NYSE:FOE), worth close to $95.2 million, accounting for 0.6% of its total 13F portfolio. Sitting at the No. 2 spot is Balyasny Asset Management, led by Dmitry Balyasny, holding a $32.9 million position; 0.2% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish encompass Don Morgan’s Brigade Capital, Chuck Royce’s Royce & Associates, and Israel Englander’s Millennium Management. We should note that Brigade Capital is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. Intriguingly, Sander Gerber’s Hudson Bay Capital Management cut the biggest investment of the 700 funds monitored by Insider Monkey, totaling about $1.6 million in stock, and Matthew Halbower’s Pentwater Capital Management was right behind this move, as the fund cut about $1.3 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ferro Corporation (NYSE:FOE) but similarly valued. We will take a look at Summit Hotel Properties Inc (NYSE:INN), TTM Technologies, Inc. (NASDAQ:TTMI), Gentherm Inc (NASDAQ:THRM), and Tree.com Inc (NASDAQ:TREE). All of these stocks’ market caps are closest to FOE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 funds with bullish positions and the average amount invested in these stocks was $63 million, which is lower than the $238 million in FOE’s case. TTM Technologies, Inc. (NASDAQ:TTMI) is the most popular stock in this table. On the other hand Summit Hotel Properties Inc (NYSE:INN) is the least popular one with only nine bullish hedge fund positions. Compared to these stocks Ferro Corporation (NYSE:FOE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.