Hedge Funds Aren’t Crazy About Franklin Resources, Inc. (BEN) Anymore

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Franklin Resources, Inc. (NYSE:BEN).

Franklin Resources, Inc. (NYSE:BEN) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 39. BEN has experienced a decrease in enthusiasm from smart money recently. There were 33 hedge funds in our database with BEN holdings at the end of December. Our calculations also showed that BEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Price MFP Investors

Michael Price of MFP Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s review the fresh hedge fund action encompassing Franklin Resources, Inc. (NYSE:BEN).

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

Heading into the second quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BEN over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Franklin Resources, Inc. (NYSE:BEN) was held by Fairfax Financial Holdings, which reported holding $29.6 million worth of stock at the end of December. It was followed by Gillson Capital with a $17.8 million position. Other investors bullish on the company included Citadel Investment Group, Schonfeld Strategic Advisors, and MFP Investors. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Franklin Resources, Inc. (NYSE:BEN), around 1.55% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 1.5 percent of its 13F equity portfolio to BEN.

Since Franklin Resources, Inc. (NYSE:BEN) has experienced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that slashed their entire stakes last quarter. Intriguingly, Bernard Horn’s Polaris Capital Management dropped the largest position of the “upper crust” of funds watched by Insider Monkey, totaling close to $37.3 million in stock, and Ravi Chopra’s Azora Capital was right behind this move, as the fund dumped about $22 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Franklin Resources, Inc. (NYSE:BEN). We will take a look at Westinghouse Air Brake Technologies Corporation (NYSE:WAB), China Southern Airlines Co Ltd (NYSE:ZNH), Solaredge Technologies Inc (NASDAQ:SEDG), Bio-Techne Corporation (NASDAQ:TECH), Liberty Global plc (NASDAQ:LBTYA), The Boston Beer Company Inc (NYSE:SAM), and Devon Energy Corporation (NYSE:DVN). All of these stocks’ market caps match BEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WAB 40 2481343 -5
ZNH 3 15588 0
SEDG 32 420741 4
TECH 23 411800 -1
LBTYA 35 848078 -1
SAM 29 903673 -6
DVN 52 1466337 7
Average 30.6 935366 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $935 million. That figure was $198 million in BEN’s case. Devon Energy Corporation (NYSE:DVN) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Franklin Resources, Inc. (NYSE:BEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BEN is 55.4. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately BEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BEN were disappointed as the stock returned 8.9% since the end of March (through 7/2) 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.

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