Here is What Hedge Funds Think About Franklin Resources, Inc. (BEN)

Does Franklin Resources, Inc. (NYSE:BEN) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Franklin Resources, Inc. (NYSE:BEN) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds’ portfolios at the end of the third quarter of 2016. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Brown-Forman Corporation (NYSE:BF), Canadian Pacific Railway Limited (USA) (NYSE:CP), and Hormel Foods Corporation (NYSE:HRL) to gather more data points.

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.

With all of this in mind, we’re going to take a look at the fresh action encompassing Franklin Resources, Inc. (NYSE:BEN).

Hedge fund activity in Franklin Resources, Inc. (NYSE:BEN)

Heading into the fourth quarter of 2016, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jonathon Jacobson’s Highfields Capital Management has the most valuable position in Franklin Resources, Inc. (NYSE:BEN), worth close to $688.6 million and comprising 6.5% of its total 13F portfolio. Sitting at the No. 2 spot is Pzena Investment Management, led by Richard S. Pzena, holding a $374.8 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass David Abrams’s Abrams Capital Management, Ric Dillon’s Diamond Hill Capital and Robert Joseph Caruso’s Select Equity Group.

Judging by the fact that Franklin Resources, Inc. (NYSE:BEN) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there were a few fund managers that elected to cut their positions entirely heading into Q4. Intriguingly, Matthew Sidman’s Three Bays Capital sold off the largest position of all the hedgies tracked by Insider Monkey, totaling about $66.7 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also dumped its stock, about $6.7 million worth of BEN shares. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Franklin Resources, Inc. (NYSE:BEN) but similarly valued. We will take a look at Brown-Forman Corporation (NYSE:BF), Canadian Pacific Railway Limited (USA) (NYSE:CP), Hormel Foods Corporation (NYSE:HRL), and Omnicom Group Inc. (NYSE:OMC). This group of stocks’ market values are closest to BEN’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1.07 billion. That figure was $1.96 billion in BEN’s case. Canadian Pacific Railway Limited (USA) (NYSE:CP) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 21 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CP might be a better candidate to consider a long position.

Disclosure: none.