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Did Hedge Funds Drop The Ball On Formula One Group (FWONA) ?

Reymerlyn Martin

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.

Formula One Group (NASDAQ:FWONA) has experienced a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that FWONA isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

01 Mason Hawkins, Southeastern Asset Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the new hedge fund action regarding Formula One Group (NASDAQ:FWONA).

Hedge fund activity in Formula One Group (NASDAQ:FWONA)

At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FWONA over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

FWONA_oct2019

More specifically, Ancient Art (Teton Capital) was the largest shareholder of Formula One Group (NASDAQ:FWONA), with a stake worth $93 million reported as of the end of March. Trailing Ancient Art (Teton Capital) was Southeastern Asset Management, which amassed a stake valued at $84 million. Ashe Capital, Odey Asset Management Group, and CQS Cayman LP were also very fond of the stock, giving the stock large weights in their portfolios.

Since Formula One Group (NASDAQ:FWONA) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of fund managers who sold off their full holdings by the end of the second quarter. At the top of the heap, Christian Leone's Luxor Capital Group cut the largest position of the 750 funds monitored by Insider Monkey, comprising about $95 million in stock. Glenn Russell Dubin's fund, Highbridge Capital Management, also dumped its stock, about $30.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds by the end of the second quarter.

Let's go over hedge fund activity in other stocks similar to Formula One Group (NASDAQ:FWONA). These stocks are Qorvo Inc (NASDAQ:QRVO), IPG Photonics Corporation (NASDAQ:IPGP), Zions Bancorporation, National Association (NASDAQ:ZION), and Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ). This group of stocks' market caps match FWONA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QRVO,28,1180673,-6 IPGP,16,142417,3 ZION,35,544360,-9 JAZZ,20,744942,-7 Average,24.75,653098,-4.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $653 million. That figure was $323 million in FWONA's case. Zions Bancorporation, National Association (NASDAQ:ZION) is the most popular stock in this table. On the other hand IPG Photonics Corporation (NASDAQ:IPGP) is the least popular one with only 16 bullish hedge fund positions. Formula One Group (NASDAQ:FWONA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FWONA as the stock returned 10.4% during the same time frame and outperformed the market by an even larger margin.

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

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