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Did Hedge Funds Catch A Break With Formula One Group (FWONK)?

·5 min read

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Formula One Group (NASDAQ:FWONK) and determine whether hedge funds had an edge regarding this stock.

Formula One Group (NASDAQ:FWONK) investors should be aware of a decrease in hedge fund sentiment in recent months. Formula One Group (NASDAQ:FWONK) was in 40 hedge funds' portfolios at the end of September. 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).

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. Keeping this in mind let's take a glance at the fresh hedge fund action regarding Formula One Group (NASDAQ:FWONK).

Ricky Sandler's tsop 10 stock picks
Ricky Sandler's tsop 10 stock picks

Ricky Sandler of Eminence Capital

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

Heading into the fourth quarter of 2021, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards FWONK 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.

Among these funds, Sculptor Capital held the most valuable stake in Formula One Group (NASDAQ:FWONK), which was worth $441 million at the end of the third quarter. On the second spot was Ashe Capital which amassed $300.8 million worth of shares. Eminence Capital, Kontiki Capital, and Tremblant 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 Fosse Capital Partners allocated the biggest weight to Formula One Group (NASDAQ:FWONK), around 22.96% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, dishing out 18.09 percent of its 13F equity portfolio to FWONK.

Because Formula One Group (NASDAQ:FWONK) has experienced falling interest from the smart money, it's safe to say that there was a specific group of hedgies that slashed their positions entirely heading into Q4. It's worth mentioning that Matthew Stadelman's Diamond Hill Capital dumped the biggest position of the 750 funds tracked by Insider Monkey, valued at close to $46.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dumped its stock, about $11.8 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds heading into Q4.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Formula One Group (NASDAQ:FWONK) but similarly valued. These stocks are PulteGroup, Inc. (NYSE:PHM), Graco Inc. (NYSE:GGG), Allegion plc (NYSE:ALLE), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Qiagen NV (NYSE:QGEN), Bruker Corporation (NASDAQ:BRKR), and Godaddy Inc (NYSE:GDDY). This group of stocks' market values are similar to FWONK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PHM,35,771756,1 GGG,32,258259,8 ALLE,32,1002211,-5 KOF,6,460706,-3 QGEN,21,599491,-1 BRKR,31,552162,0 GDDY,37,2299629,-2 Average,27.7,849173,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $849 million. That figure was $1901 million in FWONK's case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Formula One Group (NASDAQ:FWONK) is more popular among hedge funds. Our overall hedge fund sentiment score for FWONK is 76.2. 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 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 returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on FWONK as the stock returned 17.2% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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