Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in the major indices. In this article, we will take a closer look at hedge fund sentiment towards Francesca’s Holdings Corp (NASDAQ:FRAN).
Hedge fund interest in Francesca’s Holdings Corp shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FRAN to other stocks including Winnebago Industries, Inc. (NYSE:WGO), Unitil Corporation (NYSE:UTL), and Cardiovascular Systems Inc (NASDAQ:CSII) to get a better sense of its popularity.
According to most investors, hedge funds are seen as unimportant, outdated investment vehicles of the past. While there are greater than 8000 funds in operation today, We look at the upper echelon of this club, approximately 700 funds. It is estimated that this group of investors administer the majority of the hedge fund industry’s total capital, and by tailing their inimitable equity investments, Insider Monkey has come up with a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, we’re going to view the recent action surrounding Francesca’s Holdings Corp (NASDAQ:FRAN).
Hedge fund activity in Francesca’s Holdings Corp (NASDAQ:FRAN)
Heading into Q4, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mariko Gordon’s Daruma Asset Management has the biggest position in Francesca’s Holdings Corp (NASDAQ:FRAN), worth close to $38.4 million, comprising 2.4% of its total 13F portfolio. The second most bullish fund manager is Buckingham Capital Management, managed by David Keidan, which holds a $28.7 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain Jeffrey Bronchick’s Cove Street Capital, Ken Griffin’s Citadel Investment Group and Jim Simons’s Renaissance Technologies.
Seeing as Francesca’s Holdings Corp (NASDAQ:FRAN) has witnessed a declination in interest from the smart money, it’s easy to see that there is a sect of money managers that slashed their positions entirely in the third quarter. It’s worth mentioning that Neil Chriss’s Hutchin Hill Capital cut the biggest position of all the hedgies followed by Insider Monkey, valued at close to $1.5 million in stock, and Michael R. Weisberg’s Crestwood Capital Management was right behind this move, as the fund sold off about $1.4 million worth of stock. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Francesca’s Holdings Corp (NASDAQ:FRAN) but similarly valued. We will take a look at Winnebago Industries, Inc. (NYSE:WGO), Unitil Corporation (NYSE:UTL), Cardiovascular Systems Inc (NASDAQ:CSII), and SP Plus Corp (NASDAQ:SP). This group of stocks’ market caps are closest to FRAN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. Cardiovascular Systems Inc (NASDAQ:CSII) is the most popular stock in this table with 14 funds reporting long positions, while Unitil Corporation (NYSE:UTL) is the least popular one. Compared to these stocks Francesca’s Holdings Corp (NASDAQ:FRAN) is more popular among hedge funds, while the aggregate value of hedge funds’ holdings in the company stands at $136 million. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to take a closer look at the stock and potentially include it in your portfolio.