It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Franco-Nevada Corporation (NYSE:FNV).
Franco-Nevada Corporation (NYSE:FNV) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. FNV was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 16 hedge funds in our database with FNV positions at the end of the previous quarter. Our calculations also showed that FNV isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most stock holders, hedge funds are viewed as underperforming, old financial vehicles of the past. While there are over 8000 funds in operation today, We choose to focus on the bigwigs of this group, about 750 funds. Most estimates calculate that this group of people administer the majority of the smart money’s total capital, and by shadowing their top stock picks, Insider Monkey has discovered various investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to take a peek at the recent hedge fund action regarding Franco-Nevada Corporation (NYSE:FNV).
Hedge fund activity in Franco-Nevada Corporation (NYSE:FNV)
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in FNV over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Franco-Nevada Corporation (NYSE:FNV), which was worth $200.5 million at the end of the third quarter. On the second spot was Horizon Asset Management which amassed $53.3 million worth of shares. Moreover, AQR Capital Management, Royce & Associates, and GLG Partners were also bullish on Franco-Nevada Corporation (NYSE:FNV), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the largest position in Franco-Nevada Corporation (NYSE:FNV). Millennium Management had $13.6 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $11.8 million position during the quarter. The other funds with brand new FNV positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mark Lee’s Forest Hill Capital, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s check out hedge fund activity in other stocks similar to Franco-Nevada Corporation (NYSE:FNV). These stocks are Liberty Broadband Corp (NASDAQ:LBRDK), Vulcan Materials Company (NYSE:VMC), Liberty Broadband Corp (NASDAQ:LBRDA), and Magellan Midstream Partners, L.P. (NYSE:MMP). This group of stocks’ market valuations resemble FNV’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1238 million. That figure was $426 million in FNV’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Magellan Midstream Partners, L.P. (NYSE:MMP) is the least popular one with only 12 bullish hedge fund positions. Franco-Nevada Corporation (NYSE:FNV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately FNV wasn’t in this group. Hedge funds that bet on FNV were disappointed as the stock returned 9.7% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.