Is Fidelity Southern Corporation (LION) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Fidelity Southern Corporation (NASDAQ:LION) a buy here? The best stock pickers are indeed reducing their bets on the stock. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings retreated by 1 in recent months. There were 12 hedge funds in our database with LION positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Extreme Networks, Inc (NASDAQ:EXTR), Alpine Global Premier Properties Fund (NYSE:AWP), and Carrols Restaurant Group, Inc. (NASDAQ:TAST) to gather more data points.

Follow Fidelity Southern Corp (NYSE:LION)

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Now, we’re going to take a look at the key action surrounding Fidelity Southern Corporation (NASDAQ:LION).

How are hedge funds trading Fidelity Southern Corporation (NASDAQ:LION)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a loss of 8% from the second quarter of 2016. By comparison, 13 hedge funds held shares or bullish call options in LION heading into this year. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

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According to Insider Monkey’s hedge fund database, EJF Capital, led by Emanuel J. Friedman, holds the most valuable position in Fidelity Southern Corporation (NASDAQ:LION). EJF Capital has a $18.4 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $6.3 million position. Other professional money managers with similar optimism comprise Chuck Royce’s Royce & Associates, Matthew Lindenbaum’s Basswood Capital and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as Fidelity Southern Corporation (NASDAQ:LION) has encountered bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Anton Schutz’s Mendon Capital Advisors cut the largest investment of all the hedgies followed by Insider Monkey, worth an estimated $5.2 million in stock, and Robert B. Gillam’s McKinley Capital Management was right behind this move.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Fidelity Southern Corporation (NASDAQ:LION) but similarly valued. These stocks are Extreme Networks, Inc (NASDAQ:EXTR), Alpine Global Premier Properties Fund (NYSE:AWP), Carrols Restaurant Group, Inc. (NASDAQ:TAST), and Anworth Mortgage Asset Corporation (NYSE:ANH). This group of stocks’ market values are similar to LION’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXTR 20 72529 4
AWP 4 575 4
TAST 20 109657 -1
ANH 15 29893 2

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $40 million in LION’s case. Extreme Networks, Inc (NASDAQ:EXTR) is the most popular stock in this table. On the other hand Alpine Global Premier Properties Fund (NYSE:AWP) is the least popular one with only 4 bullish hedge fund positions. Fidelity Southern Corporation (NASDAQ:LION) 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. In this regard EXTR might be a better candidate to consider taking a long position in.

Disclosure: None