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Did Hedge Funds Drop The Ball On Fortune Brands Home & Security Inc (FBHS) ?

Reymerlyn Martin

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Fortune Brands Home & Security Inc (NYSE:FBHS).

Is Fortune Brands Home & Security Inc (NYSE:FBHS) a buy here? The smart money is turning less bullish. The number of long hedge fund positions fell by 2 recently. Our calculations also showed that FBHS isn't among the 30 most popular stocks among hedge funds.

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.

David Keidan of Buckingham Capital

We're going to check out the latest hedge fund action surrounding Fortune Brands Home & Security Inc (NYSE:FBHS).

What have hedge funds been doing with Fortune Brands Home & Security Inc (NYSE:FBHS)?

At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in FBHS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FBHS_apr2019

The largest stake in Fortune Brands Home & Security Inc (NYSE:FBHS) was held by Citadel Investment Group, which reported holding $62.2 million worth of stock at the end of September. It was followed by Adage Capital Management with a $54.8 million position. Other investors bullish on the company included GAMCO Investors, Carlson Capital, and D E Shaw.

Due to the fact that Fortune Brands Home & Security Inc (NYSE:FBHS) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few hedge funds that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Larry Robbins's Glenview Capital sold off the largest stake of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $127.5 million in stock. Jeff Lignelli's fund, Incline Global Management, also cut its stock, about $56.6 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Fortune Brands Home & Security Inc (NYSE:FBHS) but similarly valued. We will take a look at CubeSmart (NYSE:CUBE), Carlyle Group LP (NASDAQ:CG), BOK Financial Corporation (NASDAQ:BOKF), and Ternium S.A. (NYSE:TX). This group of stocks' market valuations match FBHS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CUBE,22,440463,2 CG,10,112818,0 BOKF,19,219708,3 TX,12,101262,-2 Average,15.75,218563,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $219 million. That figure was $419 million in FBHS's case. CubeSmart (NYSE:CUBE) is the most popular stock in this table. On the other hand Carlyle Group LP (NASDAQ:CG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Fortune Brands Home & Security Inc (NYSE:FBHS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. 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 FBHS as the stock returned 33.5% and outperformed the market as well.

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

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