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Were Hedge Funds Right About Flocking Into Fair Isaac Corporation (FICO) ?

Insider Monkey has processed numerous 13F filings of hedge funds and famous investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and investors’ positions as of the end of the fourth quarter. You can find write-ups 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 and analyze what the smart money thinks of Fair Isaac Corporation (NYSE:FICO) based on that data.

Is Fair Isaac Corporation (NYSE:FICO) the right pick for your portfolio? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions moved up by 3 recently. Our calculations also showed that FICO isn’t among the 30 most popular stocks among hedge funds. FICO was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 21 hedge funds in our database with FICO holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Rogers Ariel Investments

We’re going to view the key hedge fund action regarding Fair Isaac Corporation (NYSE:FICO).

How are hedge funds trading Fair Isaac Corporation (NYSE:FICO)?

At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FICO over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

FICO_apr2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in Fair Isaac Corporation (NYSE:FICO), worth close to $57.6 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $52.3 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions encompass John W. Rogers’s Ariel Investments, Israel Englander’s Millennium Management and Richard Scott Greeder’s Broad Bay Capital.

With a general bullishness amongst the heavyweights, key money managers have jumped into Fair Isaac Corporation (NYSE:FICO) headfirst. Broad Bay Capital, managed by Richard Scott Greeder, initiated the biggest position in Fair Isaac Corporation (NYSE:FICO). Broad Bay Capital had $28.1 million invested in the company at the end of the quarter. Marcelo Desio’s Lucha Capital Management also initiated a $14.6 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Matthew Hulsizer’s PEAK6 Capital Management, and Brandon Haley’s Holocene Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Fair Isaac Corporation (NYSE:FICO). These stocks are Zayo Group Holdings Inc (NYSE:ZAYO), RenaissanceRe Holdings Ltd. (NYSE:RNR), Fortune Brands Home & Security Inc (NYSE:FBHS), and CubeSmart (NYSE:CUBE). This group of stocks’ market valuations match FICO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZAYO 56 1247889 1
RNR 22 489483 2
FBHS 31 418666 -2
CUBE 22 440463 2
Average 32.75 649125 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $314 million in FICO’s case. Zayo Group Holdings Inc (NYSE:ZAYO) is the most popular stock in this table. On the other hand RenaissanceRe Holdings Ltd. (NYSE:RNR) is the least popular one with only 22 bullish hedge fund positions. Fair Isaac Corporation (NYSE:FICO) 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. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on FICO as the stock returned 47.3% and outperformed the market as well.

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

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