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Is Franco-Nevada Corporation (FNV) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Franco-Nevada Corporation (NYSE:FNV) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Franco-Nevada Corporation (NYSE:FNV) a bargain? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund positions increased by 2 lately. Franco-Nevada Corporation (NYSE:FNV) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that FNV isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the eyes of most stock holders, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts choose to focus on the masters of this club, about 850 funds. These investment experts orchestrate the lion’s share of the hedge fund industry’s total asset base, and by tracking their unrivaled investments, Insider Monkey has unearthed various investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Eric Sprott Sprott Asset Management

Eric Sprott of Sprott 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 after its stock price crashed. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a peek at the latest hedge fund action regarding Franco-Nevada Corporation (NYSE:FNV).

Hedge fund activity in Franco-Nevada Corporation (NYSE:FNV)

At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in FNV over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Franco-Nevada Corporation (NYSE:FNV), with a stake worth $792 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $221.7 million. Horizon Asset Management, D E Shaw, and Sprott Asset Management 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 Beddow Capital Management allocated the biggest weight to Franco-Nevada Corporation (NYSE:FNV), around 4.95% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, designating 4.94 percent of its 13F equity portfolio to FNV.

As industrywide interest jumped, some big names were breaking ground themselves. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, created the most outsized position in Franco-Nevada Corporation (NYSE:FNV). Empyrean Capital Partners had $10.5 million invested in the company at the end of the quarter. Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management also initiated a $4.8 million position during the quarter. The following funds were also among the new FNV investors: Peter Muller’s PDT Partners, Mario Gabelli’s GAMCO Investors, and Israel Englander’s Millennium Management.

Let’s check out hedge fund activity in other stocks similar to Franco-Nevada Corporation (NYSE:FNV). These stocks are Manulife Financial Corporation (NYSE:MFC), AutoZone, Inc. (NYSE:AZO), Yum! Brands, Inc. (NYSE:YUM), Republic Services, Inc. (NYSE:RSG), KKR & Co Inc. (NYSE:KKR), Datadog, Inc. (NASDAQ:DDOG), and Hormel Foods Corporation (NYSE:HRL). All of these stocks’ market caps are closest to FNV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MFC 19 171076 -1
AZO 55 2395499 10
YUM 47 1633184 6
RSG 37 821669 5
KKR 45 3339623 -3
DDOG 57 2363237 13
HRL 27 440889 -1
Average 41 1595025 4.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1595 million. That figure was $1375 million in FNV’s case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Manulife Financial Corporation (NYSE:MFC) is the least popular one with only 19 bullish hedge fund positions. Franco-Nevada Corporation (NYSE:FNV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FNV is 41. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately FNV wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FNV investors were disappointed as the stock returned 0.1% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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