In this article we are going to use hedge fund sentiment as a tool and determine whether Ferro Corporation (NYSE:FOE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is FOE a good stock to buy now? Ferro Corporation (NYSE:FOE) shareholders have witnessed a decrease in hedge fund interest recently. Ferro Corporation (NYSE:FOE) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 28. Our calculations also showed that FOE 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.
To the average investor there are many indicators market participants employ to analyze publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outclass the broader indices by a very impressive margin (see the details here).
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. Now let’s take a look at the new hedge fund action surrounding Ferro Corporation (NYSE:FOE).
Do Hedge Funds Think FOE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FOE over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ferro Corporation (NYSE:FOE) was held by GAMCO Investors, which reported holding $51.4 million worth of stock at the end of September. It was followed by Omega Advisors with a $41.2 million position. Other investors bullish on the company included Brigade Capital, Arrowstreet Capital, and Royce & Associates. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to Ferro Corporation (NYSE:FOE), around 4.05% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, earmarking 1.5 percent of its 13F equity portfolio to FOE.
Because Ferro Corporation (NYSE:FOE) has faced falling interest from the smart money, logic holds that there were a few funds that slashed their full holdings last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling about $1.2 million in stock, and Ali Motamed’s Invenomic Capital Management was right behind this move, as the fund said goodbye to about $0.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ferro Corporation (NYSE:FOE) but similarly valued. These stocks are Comstock Resources Inc (NYSE:CRK), Franchise Group, Inc. (NASDAQ:FRG), The Macerich Company (NYSE:MAC), DRDGOLD Ltd. (NYSE:DRD), Castle Biosciences, Inc. (NASDAQ:CSTL), Suburban Propane Partners LP (NYSE:SPH), and DiamondRock Hospitality Company (NYSE:DRH). All of these stocks’ market caps are similar to FOE’s market cap.
|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 14 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $145 million in FOE’s case. Comstock Resources Inc (NYSE:CRK) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 3 bullish hedge fund positions. Ferro Corporation (NYSE:FOE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FOE is 46.6. 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 FOE, though not to the same extent, as the stock returned 9.2% since Q3 (through December 14th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.