Were Hedge Funds Illusioned With Fair Isaac Corporation (FICO)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 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 September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Fair Isaac Corporation (NYSE:FICO) and determine whether the smart money was really smart about this stock.

Fair Isaac Corporation (NYSE:FICO) investors should pay attention to an increase in enthusiasm from smart money in recent months. Fair Isaac Corporation (NYSE:FICO) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that FICO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding Fair Isaac Corporation (NYSE:FICO).

Gabriel Plotkin Melvin Capital Management

Gabriel Plotkin of Melvin Capital Management

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

At the end of September, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 32% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards FICO over the last 25 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, Valley Forge Capital was the largest shareholder of Fair Isaac Corporation (NYSE:FICO), with a stake worth $288.4 million reported as of the end of September. Trailing Valley Forge Capital was Melvin Capital Management, which amassed a stake valued at $159.2 million. Ako Capital, Melvin Capital Management, and Kensico 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 Valley Forge Capital allocated the biggest weight to Fair Isaac Corporation (NYSE:FICO), around 11.46% of its 13F portfolio. Heard Capital is also relatively very bullish on the stock, designating 10.3 percent of its 13F equity portfolio to FICO.

Now, some big names have jumped into Fair Isaac Corporation (NYSE:FICO) headfirst. Kensico Capital, managed by Michael Lowenstein, established the most valuable position in Fair Isaac Corporation (NYSE:FICO). Kensico Capital had $58.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $21.9 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw, and Brandon Haley’s Holocene Advisors.

Let’s also examine hedge fund activity in other stocks similar to Fair Isaac Corporation (NYSE:FICO). These stocks are Black Knight, Inc. (NYSE:BKI), Snap-on Incorporated (NYSE:SNA), Targa Resources Corp (NYSE:TRGP), Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation (NYSE:UWMC), Morningstar, Inc. (NASDAQ:MORN), and Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR). This group of stocks’ market caps are similar to FICO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKI 38 775299 5
SNA 29 551227 -2
TRGP 26 567252 0
RHI 27 318494 4
UWMC 16 32122 -4
MORN 26 1645201 2
EBR 6 3756 1
Average 24 556193 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $1004 million in FICO’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is the least popular one with only 6 bullish hedge fund positions. Fair Isaac Corporation (NYSE:FICO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FICO is 83.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on FICO as the stock returned 24.4% since the end of Q3 (through 1/31) 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.