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Did Hedge Funds Drop The Ball On FirstCash, Inc. (FCFS) ?

Nina Todic

How do we determine whether FirstCash, Inc. (NASDAQ:FCFS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

FirstCash, Inc. (NASDAQ:FCFS) investors should pay attention to a decrease in activity from the world's largest hedge funds recently. Our calculations also showed that fcfs isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We're going to check out the new hedge fund action surrounding FirstCash, Inc. (NASDAQ:FCFS).

What does the smart money think about FirstCash, Inc. (NASDAQ:FCFS)?

At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FCFS over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With FCFS Positions

The largest stake in FirstCash, Inc. (NASDAQ:FCFS) was held by Renaissance Technologies, which reported holding $114.6 million worth of stock at the end of September. It was followed by D E Shaw with a $7.4 million position. Other investors bullish on the company included AQR Capital Management, Balyasny Asset Management, and Citadel Investment Group.

Because FirstCash, Inc. (NASDAQ:FCFS) has faced a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies that slashed their positions entirely heading into Q3. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest investment of all the hedgies followed by Insider Monkey, comprising close to $23.3 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund sold off about $5.9 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds heading into Q3.

Let's now review hedge fund activity in other stocks similar to FirstCash, Inc. (NASDAQ:FCFS). These stocks are Black Stone Minerals LP (NYSE:BSM), Darling Ingredients Inc. (NYSE:DAR), HUYA Inc. (NYSE:HUYA), and Commscope Holding Company Inc (NASDAQ:COMM). This group of stocks' market values are closest to FCFS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BSM,5,10666,0 DAR,18,260731,-1 HUYA,16,150270,-1 COMM,28,887562,-3 Average,16.75,327307,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $327 million. That figure was $131 million in FCFS's case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 5 bullish hedge fund positions. FirstCash, Inc. (NASDAQ:FCFS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on FCFS, though not to the same extent, as the stock returned 23% and outperformed the market as well.

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

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