Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Fortune Brands Home & Security Inc (NYSE:FBHS).
Is FBHS a good stock to buy? Money managers were in a bearish mood. The number of bullish hedge fund positions went down by 1 in recent months. Fortune Brands Home & Security Inc (NYSE:FBHS) was in 33 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 37. Our calculations also showed that FBHS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 34 hedge funds in our database with FBHS holdings at the end of June. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are viewed as slow, outdated financial tools of the past. While there are greater than 8000 funds in operation at present, Our experts look at the leaders of this club, about 850 funds. It is estimated that this group of investors control the majority of all hedge funds' total asset base, and by tracking their inimitable equity investments, Insider Monkey has determined a number of investment strategies that have historically outperformed the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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Do Hedge Funds Think FBHS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FBHS over the last 21 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.
More specifically, AQR Capital Management was the largest shareholder of Fortune Brands Home & Security Inc (NYSE:FBHS), with a stake worth $49.9 million reported as of the end of September. Trailing AQR Capital Management was Giverny Capital, which amassed a stake valued at $43.5 million. GAMCO Investors, Arrowstreet Capital, and Alyeska Investment Group 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 Giverny Capital allocated the biggest weight to Fortune Brands Home & Security Inc (NYSE:FBHS), around 3.99% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, setting aside 0.46 percent of its 13F equity portfolio to FBHS.
Due to the fact that Fortune Brands Home & Security Inc (NYSE:FBHS) has witnessed declining sentiment from hedge fund managers, we can see that there exists a select few funds that slashed their entire stakes heading into Q4. Intriguingly, Dmitry Balyasny's Balyasny Asset Management dumped the biggest position of all the hedgies watched by Insider Monkey, valued at close to $24.6 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also dropped its stock, about $3.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Fortune Brands Home & Security Inc (NYSE:FBHS). We will take a look at Qiagen NV (NASDAQ:QGEN), Solaredge Technologies Inc (NASDAQ:SEDG), Zendesk Inc (NYSE:ZEN), Arch Capital Group Ltd. (NASDAQ:ACGL), M&T Bank Corporation (NYSE:MTB), Atmos Energy Corporation (NYSE:ATO), and Wabtec Corporation (NYSE:WAB). This group of stocks' market caps match FBHS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QGEN,29,580443,-3 SEDG,31,553013,6 ZEN,59,1680411,-4 ACGL,41,1229443,5 MTB,35,503738,5 ATO,18,110743,-4 WAB,38,1732099,-1 Average,35.9,912841,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was $299 million in FBHS's case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 18 bullish hedge fund positions. Fortune Brands Home & Security Inc (NYSE:FBHS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FBHS is 49. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately FBHS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FBHS investors were disappointed as the stock returned 3.9% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.