Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is FTI Consulting, Inc. (NYSE:FCN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is FCN a good stock to buy? Hedge funds were turning bullish. The number of long hedge fund bets inched up by 5 recently. FTI Consulting, Inc. (NYSE:FCN) was in 37 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FCN 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 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 stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to take a look at the recent hedge fund action surrounding FTI Consulting, Inc. (NYSE:FCN).
Do Hedge Funds Think FCN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the second quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in FCN 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.
More specifically, Greenvale Capital was the largest shareholder of FTI Consulting, Inc. (NYSE:FCN), with a stake worth $79.5 million reported as of the end of September. Trailing Greenvale Capital was Nitorum Capital, which amassed a stake valued at $58.6 million. Millennium Management, AQR Capital Management, and Shellback Capital 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 Greenvale Capital allocated the biggest weight to FTI Consulting, Inc. (NYSE:FCN), around 13.43% of its 13F portfolio. Kingstown Capital Management is also relatively very bullish on the stock, earmarking 6.52 percent of its 13F equity portfolio to FCN.
As industrywide interest jumped, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable position in FTI Consulting, Inc. (NYSE:FCN). Citadel Investment Group had $14.9 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also made a $4.4 million investment in the stock during the quarter. The following funds were also among the new FCN investors: Seth Cogswell’s Running Oak Capital, Dmitry Balyasny’s Balyasny Asset Management, and Brandon Haley’s Holocene Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as FTI Consulting, Inc. (NYSE:FCN) but similarly valued. We will take a look at Curtiss-Wright Corp. (NYSE:CW), QTS Realty Trust Inc (NYSE:QTS), Shift4 Payments, Inc. (NYSE:FOUR), Parsley Energy Inc (NYSE:PE), Qualys Inc (NASDAQ:QLYS), Rackspace Technology, Inc. (NASDAQ:RXT), and New York Community Bancorp, Inc. (NYSE:NYCB). This group of stocks’ market values are closest to FCN’s market value.
|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 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $388 million in FCN’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand Rackspace Technology, Inc. (NASDAQ:RXT) is the least popular one with only 15 bullish hedge fund positions. FTI Consulting, Inc. (NYSE:FCN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FCN is 90. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately FCN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FCN were disappointed as the stock returned 5% since the end of September (through 12/18) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.