Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Frank’s International N.V. (NYSE:FI).
Is Frank’s International N.V. (NYSE:FI) a buy, sell, or hold? Prominent investors are becoming more confident. The number of long hedge fund positions went up by 1 recently. Our calculations also showed that fi isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a gander at the recent hedge fund action regarding Frank’s International N.V. (NYSE:FI).
What have hedge funds been doing with Frank’s International N.V. (NYSE:FI)?
At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in FI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, First Pacific Advisors LLC held the most valuable stake in Frank’s International N.V. (NYSE:FI), which was worth $11 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $5.1 million worth of shares. Moreover, D E Shaw, Renaissance Technologies, and Laurion Capital Management were also bullish on Frank’s International N.V. (NYSE:FI), allocating a large percentage of their portfolios to this stock.
Now, some big names were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, established the most valuable position in Frank’s International N.V. (NYSE:FI). Renaissance Technologies had $1.4 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new FI position is Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Frank’s International N.V. (NYSE:FI) but similarly valued. We will take a look at PROS Holdings, Inc. (NYSE:PRO), TiVo Corporation (NASDAQ:TIVO), 3D Systems Corporation (NYSE:DDD), and Big Lots, Inc. (NYSE:BIG). All of these stocks’ market caps are closest to FI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRO | 15 | 111619 | -1 |
| TIVO | 19 | 90952 | 1 |
| DDD | 11 | 50546 | -3 |
| BIG | 19 | 137809 | 0 |
| Average | 16 | 97732 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $24 million in FI’s case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand 3D Systems Corporation (NYSE:DDD) is the least popular one with only 11 bullish hedge fund positions. Frank’s International N.V. (NYSE:FI) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on FI as the stock returned 25.5% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
