Is FWONK 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 Formula One Group (NASDAQ:FWONK) based on that data.

Is FWONK a good stock to buy now? Investors who are in the know were turning less bullish. The number of long hedge fund positions shrunk by 9 recently. Formula One Group (NASDAQ:FWONK) was in 40 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 54. Our calculations also showed that FWONK 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 49 hedge funds in our database with FWONK 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 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 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.

William Graves Boardman Bay Capital

William Graves of Boardman Bay Capital

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 new hedge fund action regarding Formula One Group (NASDAQ:FWONK).

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

At the end of September, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in FWONK a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the largest position in Formula One Group (NASDAQ:FWONK). OZ Management has a $269.5 million position in the stock, comprising 1.7% of its 13F portfolio. On OZ Management’s heels is Ashe Capital, managed by William Crowley, William Harker, and Stephen Blass, which holds a $212.2 million position; 15.4% of its 13F portfolio is allocated to the company. Other peers with similar optimism consist of Ken Griffin’s Citadel Investment Group, Ricky Sandler’s Eminence Capital and Brett Barakett’s Tremblant Capital. In terms of the portfolio weights assigned to each position Cowbird Capital allocated the biggest weight to Formula One Group (NASDAQ:FWONK), around 16.82% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, dishing out 15.4 percent of its 13F equity portfolio to FWONK.

Judging by the fact that Formula One Group (NASDAQ:FWONK) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of money managers who were dropping their positions entirely in the third quarter. Intriguingly, Jeffrey Tannenbaum’s Fir Tree sold off the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $24.5 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund said goodbye to about $17.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 9 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Formula One Group (NASDAQ:FWONK) but similarly valued. We will take a look at Henry Schein, Inc. (NASDAQ:HSIC), Pinnacle West Capital Corporation (NYSE:PNW), China Southern Airlines Co Ltd (NYSE:ZNH), Formula One Group (NASDAQ:FWONA), Trex Company, Inc. (NYSE:TREX), News Corp (NASDAQ:NWSA), and Weibo Corp (NASDAQ:WB). All of these stocks’ market caps resemble FWONK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HSIC 40 1233636 7
PNW 22 404432 -3
ZNH 3 9774 1
FWONA 19 257009 2
TREX 26 289064 -2
NWSA 31 485450 7
WB 13 86325 -1
Average 22 395099 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $1464 million in FWONK’s case. Henry Schein, Inc. (NASDAQ:HSIC) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Formula One Group (NASDAQ:FWONK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FWONK is 68.2. 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 FWONK as the stock returned 17.6% 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.