Hedge Funds Cashing Out Of Franklin Resources, Inc. (BEN)

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 821 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).

Is Franklin Resources, Inc. (NYSE:BEN) the right pick for your portfolio? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund bets went down by 5 in recent months. Our calculations also showed that BEN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are viewed as unimportant, old financial tools of the past. While there are greater than 8000 funds with their doors open today, Our researchers hone in on the top tier of this club, around 850 funds. It is estimated that this group of investors control the lion’s share of all hedge funds’ total capital, and by shadowing their highest performing picks, Insider Monkey has revealed a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Prem Watsa of Fairfax Financial Holdings

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the recent hedge fund action encompassing Franklin Resources, Inc. (NYSE:BEN).

What have hedge funds been doing with Franklin Resources, Inc. (NYSE:BEN)?

At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in BEN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, Abrams Capital Management held the most valuable stake in Franklin Resources, Inc. (NYSE:BEN), which was worth $162.2 million at the end of the third quarter. On the second spot was Polaris Capital Management which amassed $22.2 million worth of shares. Arrowstreet Capital, Fairfax Financial Holdings, and Moerus Capital Management 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 Meru Capital allocated the biggest weight to Franklin Resources, Inc. (NYSE:BEN), around 9% of its 13F portfolio. Moerus Capital Management is also relatively very bullish on the stock, earmarking 7.33 percent of its 13F equity portfolio to BEN.

Since Franklin Resources, Inc. (NYSE:BEN) has experienced bearish sentiment from the smart money, it’s safe to say that there exists a select few hedgies who sold off their entire stakes heading into Q4. Interestingly, Ray Dalio’s Bridgewater Associates said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $2.7 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund dumped about $2 million worth. These moves are important to note, as total hedge fund interest dropped by 5 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Franklin Resources, Inc. (NYSE:BEN). We will take a look at WPP Plc (NYSE:WPP), Lyft, Inc. (NASDAQ:LYFT), Packaging Corporation Of America (NYSE:PKG), and Graco Inc. (NYSE:GGG). This group of stocks’ market caps match BEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WPP 5 29321 -2
LYFT 31 389490 -14
PKG 23 105812 5
GGG 21 157995 0
Average 20 170655 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $331 million in BEN’s case. Lyft, Inc. (NASDAQ:LYFT) is the most popular stock in this table. On the other hand WPP Plc (NYSE:WPP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Franklin Resources, Inc. (NYSE:BEN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately BEN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BEN were disappointed as the stock returned 13.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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