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Hedge Funds Have Never Been This Bullish On Funko, Inc. (FNKO)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Funko, Inc. (NASDAQ:FNKO).

Funko, Inc. (NASDAQ:FNKO) investors should be aware of an increase in support from the world’s most elite money managers recently. FNKO was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 10 hedge funds in our database with FNKO positions at the end of the previous quarter. Our calculations also showed that FNKO isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus

Let’s take a glance at the fresh hedge fund action encompassing Funko, Inc. (NASDAQ:FNKO).

How are hedge funds trading Funko, Inc. (NASDAQ:FNKO)?

At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FNKO over the last 14 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

FNKO_may2019

Among these funds, Woodson Capital Management held the most valuable stake in Funko, Inc. (NASDAQ:FNKO), which was worth $20.5 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $5.7 million worth of shares. Moreover, Osterweis Capital Management, Driehaus Capital, and Shellback Capital were also bullish on Funko, Inc. (NASDAQ:FNKO), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, established the most valuable position in Funko, Inc. (NASDAQ:FNKO). Shellback Capital had $2.1 million invested in the company at the end of the quarter. Joseph A. Jolson’s Harvest Capital Strategies also initiated a $1.5 million position during the quarter. The following funds were also among the new FNKO investors: James Woodson Davis’s Woodson Capital Management, Ken Griffin’s Citadel Investment Group, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Funko, Inc. (NASDAQ:FNKO) but similarly valued. These stocks are Nova Measuring Instruments Ltd. (NASDAQ:NVMI), Civitas Solutions Inc (NYSE:CIVI), SIGA Technologies Inc. (NASDAQ:SIGA), and i3 Verticals, Inc. (NASDAQ:IIIV). This group of stocks’ market caps match FNKO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVMI 9 74480 0
CIVI 15 76552 3
SIGA 10 44299 1
IIIV 8 78989 -4
Average 10.5 68580 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $40 million in FNKO’s case. Civitas Solutions Inc (NYSE:CIVI) is the most popular stock in this table. On the other hand i3 Verticals, Inc. (NASDAQ:IIIV) is the least popular one with only 8 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on FNKO as the stock returned 41% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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