Is Fanhua (FANH) A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Fanhua Inc. (NASDAQ:FANH) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Fanhua (FANH) a good stock to buy now? The best stock pickers were taking an optimistic view. The number of long hedge fund positions advanced by 1 recently. Fanhua Inc. (NASDAQ:FANH) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 10. Our calculations also showed that FANH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 4 hedge funds in our database with FANH positions at the end of the second quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are tons of indicators stock market investors put to use to evaluate their stock investments. A duo of the less known indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a healthy margin (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the new hedge fund action regarding Fanhua Inc. (NASDAQ:FANH).

What does smart money think about Fanhua Inc. (NASDAQ:FANH)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FANH over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is FANH A Good Stock To Buy?

More specifically, D E Shaw was the largest shareholder of Fanhua Inc. (NASDAQ:FANH), with a stake worth $1.5 million reported as of the end of September. Trailing D E Shaw was Renaissance Technologies, which amassed a stake valued at $1.2 million. Marshall Wace LLP, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Marshall Wace LLP allocated the biggest weight to Fanhua Inc. (NASDAQ:FANH), around 0.01% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, earmarking 0.0018 percent of its 13F equity portfolio to FANH.

Consequently, specific money managers have jumped into Fanhua Inc. (NASDAQ:FANH) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Fanhua Inc. (NASDAQ:FANH). Marshall Wace LLP had $1.2 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.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Fanhua Inc. (NASDAQ:FANH) but similarly valued. These stocks are OrthoPediatrics Corp. (NASDAQ:KIDS), Systemax Inc. (NYSE:SYX), Fulgent Genetics, Inc. (NASDAQ:FLGT), Dine Brands Global, Inc. (NYSE:DIN), SFL Corporation Ltd. (NYSE:SFL), AZZ Incorporated (NYSE:AZZ), and Gossamer Bio, Inc. (NASDAQ:GOSS). All of these stocks’ market caps resemble FANH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KIDS 12 69579 -1
SYX 15 29792 4
FLGT 6 32654 3
DIN 25 150078 0
SFL 10 30526 -5
AZZ 15 66278 -5
GOSS 21 196663 2
Average 14.9 82224 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $6 million in FANH’s case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Fulgent Genetics, Inc. (NASDAQ:FLGT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Fanhua Inc. (NASDAQ:FANH) is even less popular than FLGT. Our overall hedge fund sentiment score for FANH is 21. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards FANH. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately FANH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FANH investors were disappointed as the stock returned -14.1% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market so far in 2020.

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