We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Funko, Inc. (NASDAQ:FNKO).
Is Funko, Inc. (NASDAQ:FNKO) a splendid investment today? Investors who are in the know are taking a bullish view. The number of bullish hedge fund bets inched up by 1 recently. Our calculations also showed that FNKO isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the latest hedge fund action regarding Funko, Inc. (NASDAQ:FNKO).
What does smart money think about Funko, Inc. (NASDAQ:FNKO)?
At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in FNKO 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.
David Keidan of Buckingham Capital
Among these funds, Woodson Capital Management held the most valuable stake in Funko, Inc. (NASDAQ:FNKO), which was worth $33.1 million at the end of the second quarter. On the second spot was Driehaus Capital which amassed $12.3 million worth of shares. Moreover, Millennium Management, Manatuck Hill Partners, and Buckingham Capital Management were also bullish on Funko, Inc. (NASDAQ:FNKO), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have been driving this bullishness. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, created the most outsized position in Funko, Inc. (NASDAQ:FNKO). Springbok Capital had $0.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.5 million position during the quarter. The following funds were also among the new FNKO investors: Matthew Hulsizer’s PEAK6 Capital Management, Bruce Kovner’s Caxton Associates LP, and Allan Teh’s Kamunting Street Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Funko, Inc. (NASDAQ:FNKO) but similarly valued. We will take a look at Brigham Minerals, Inc. (NYSE:MNRL), Loral Space & Communications Inc. (NASDAQ:LORL), KEMET Corporation (NYSE:KEM), and Meta Financial Group Inc. (NASDAQ:CASH). This group of stocks’ market caps are similar to FNKO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MNRL | 15 | 79480 | 15 |
| LORL | 16 | 513824 | -3 |
| KEM | 18 | 146880 | -1 |
| CASH | 12 | 123017 | 0 |
| Average | 15.25 | 215800 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $97 million in FNKO’s case. KEMET Corporation (NYSE:KEM) is the most popular stock in this table. On the other hand Meta Financial Group Inc. (NASDAQ:CASH) is the least popular one with only 12 bullish hedge fund positions. Funko, Inc. (NASDAQ:FNKO) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FNKO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FNKO were disappointed as the stock returned -15% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
