Is FCFS A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of FirstCash, Inc. (NASDAQ:FCFS) based on that data.

Is FCFS a good stock to buy now? The best stock pickers were getting less optimistic. The number of bullish hedge fund bets dropped by 1 recently. FirstCash, Inc. (NASDAQ:FCFS) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 22. Our calculations also showed that FCFS 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 22 hedge funds in our database with FCFS positions at the end of the second quarter.

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

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. With all of this in mind let’s take a look at the latest hedge fund action regarding FirstCash, Inc. (NASDAQ:FCFS).

Do Hedge Funds Think FCFS Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FCFS over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in FirstCash, Inc. (NASDAQ:FCFS), which was worth $61 million at the end of the third quarter. On the second spot was Yacktman Asset Management which amassed $31.8 million worth of shares. Nantahala Capital Management, Hosking Partners, and Marshall Wace LLP 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 Nantahala Capital Management allocated the biggest weight to FirstCash, Inc. (NASDAQ:FCFS), around 0.76% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, earmarking 0.47 percent of its 13F equity portfolio to FCFS.

Judging by the fact that FirstCash, Inc. (NASDAQ:FCFS) has witnessed falling interest from hedge fund managers, it’s easy to see that there exists a select few hedge funds who were dropping their entire stakes heading into Q4. Intriguingly, Greg Eisner’s Engineers Gate Manager dropped the largest investment of the 750 funds tracked by Insider Monkey, valued at about $1.6 million in stock. Peter Muller’s fund, PDT Partners, also sold off its stock, about $0.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as FirstCash, Inc. (NASDAQ:FCFS) but similarly valued. These stocks are HB Fuller Co (NYSE:FUL), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Tri Pointe Group Inc (NYSE:TPH), UMB Financial Corporation (NASDAQ:UMBF), Park Hotels & Resorts Inc. (NYSE:PK), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and PJT Partners Inc (NYSE:PJT). All of these stocks’ market caps are closest to FCFS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FUL 16 141330 6
KTOS 14 31213 -8
TPH 31 257365 0
UMBF 17 75481 2
PK 17 76710 -4
CSOD 24 555427 -7
PJT 16 100618 -5
Average 19.3 176878 -2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $168 million in FCFS’s case. Tri Pointe Group Inc (NYSE:TPH) is the most popular stock in this table. On the other hand Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is the least popular one with only 14 bullish hedge fund positions. FirstCash, Inc. (NASDAQ:FCFS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FCFS is 53.2. 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. Our calculations showed that top 20 most popular stocks among hedge funds 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 December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on FCFS as the stock returned 23.7% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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