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Did Hedge Funds Make The Right Call On FTI Consulting, Inc. (FCN) ?

Asma UL Husna
·5 min read

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 first 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 4.5 years and analyze what the smart money thinks of FTI Consulting, Inc. (NYSE:FCN) based on that data and determine whether they were really smart about the stock.

FTI Consulting, Inc. (NYSE:FCN) was in 19 hedge funds' portfolios at the end of the first quarter of 2020. FCN has seen a decrease in hedge fund interest of late. There were 21 hedge funds in our database with FCN positions at the end of the previous quarter. Our calculations also showed that FCN isn't among the 30 most popular stocks among hedge funds (click for Q1 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 today’s marketplace there are numerous metrics investors put to use to analyze publicly traded companies. A duo of the most useful metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best investment managers can outperform the market by a significant amount (see the details here).

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let's take a look at the latest hedge fund action surrounding FTI Consulting, Inc. (NYSE:FCN).

What have hedge funds been doing with FTI Consulting, Inc. (NYSE:FCN)?

At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in FCN a year ago. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in FTI Consulting, Inc. (NYSE:FCN) was held by Greenvale Capital, which reported holding $47.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $27.8 million position. Other investors bullish on the company included AQR Capital Management, Shellback Capital, and Columbus Circle Investors. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to FTI Consulting, Inc. (NYSE:FCN), around 12.59% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, dishing out 4.04 percent of its 13F equity portfolio to FCN.

Seeing as FTI Consulting, Inc. (NYSE:FCN) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers who were dropping their positions entirely last quarter. Intriguingly, Michael Kharitonov and Jon David McAuliffe's Voleon Capital dropped the largest investment of the 750 funds followed by Insider Monkey, comprising an estimated $1.3 million in stock, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund dropped about $1 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let's go over hedge fund activity in other stocks similar to FTI Consulting, Inc. (NYSE:FCN). These stocks are Santander Consumer USA Holdings Inc (NYSE:SC), Nielsen Holdings plc (NYSE:NLSN), MKS Instruments, Inc. (NASDAQ:MKSI), and The Boston Beer Company Inc (NYSE:SAM). This group of stocks' market valuations resemble FCN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SC,20,423643,-7 NLSN,33,762761,4 MKSI,27,296258,-1 SAM,24,557916,-2 Average,26,510145,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $510 million. That figure was $175 million in FCN's case. Nielsen Holdings plc (NYSE:NLSN) is the most popular stock in this table. On the other hand Santander Consumer USA Holdings Inc (NYSE:SC) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks FTI Consulting, Inc. (NYSE:FCN) is even less popular than SC. Hedge funds dodged a bullet by taking a bearish stance towards FCN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately FCN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FCN investors were disappointed as the stock returned -5.2% since Q1 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 so far in 2020.

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

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