The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Federal Signal Corporation (NYSE:FSS) based on those filings.
Is Federal Signal Corporation (NYSE:FSS) ready to rally soon? Investors who are in the know are in a bearish mood. The number of long hedge fund positions fell by 1 lately. Our calculations also showed that FSS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a multitude of metrics stock market investors have at their disposal to evaluate publicly traded companies. A pair of the most under-the-radar metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outclass the market by a very impressive margin (see the details here).
[caption id="attachment_746830" align="aligncenter" width="473"] Matthew Hulsizer of PEAK6 Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the latest hedge fund action surrounding Federal Signal Corporation (NYSE:FSS).
How have hedgies been trading Federal Signal Corporation (NYSE:FSS)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FSS over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Federal Signal Corporation (NYSE:FSS), with a stake worth $24.4 million reported as of the end of September. Trailing GAMCO Investors was Royce & Associates, which amassed a stake valued at $9.6 million. Renaissance Technologies, Driehaus Capital, and Impax Asset Management 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 Algert Coldiron Investors allocated the biggest weight to Federal Signal Corporation (NYSE:FSS), around 0.71% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 0.7 percent of its 13F equity portfolio to FSS.
Because Federal Signal Corporation (NYSE:FSS) has witnessed declining sentiment from hedge fund managers, it's safe to say that there was a specific group of funds who sold off their full holdings by the end of the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $3.2 million in stock. Noam Gottesman's fund, GLG Partners, also dumped its stock, about $1.3 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Federal Signal Corporation (NYSE:FSS) but similarly valued. These stocks are Asbury Automotive Group, Inc. (NYSE:ABG), United States Steel Corporation (NYSE:X), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), and Hertz Global Holdings, Inc. (NYSE:HTZ). This group of stocks' market valuations are similar to FSS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABG,21,287252,4 X,20,169213,1 KTOS,21,76636,3 HTZ,25,1158188,-5 Average,21.75,422822,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $423 million. That figure was $78 million in FSS's case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand United States Steel Corporation (NYSE:X) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Federal Signal Corporation (NYSE:FSS) is even less popular than X. Hedge funds dodged a bullet by taking a bearish stance towards FSS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FSS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FSS investors were disappointed as the stock returned 0.9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.