We can judge whether FirstCash, Inc. (NASDAQ:FCFS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
FirstCash, Inc. (NASDAQ:FCFS) was in 16 hedge funds' portfolios at the end of the third quarter of 2019. FCFS investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 15 hedge funds in our database with FCFS positions at the end of the previous quarter. Our calculations also showed that FCFS 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_26794" align="aligncenter" width="359"] Paul Tudor Jones of Tudor Investment Corp[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's check out the latest hedge fund action surrounding FirstCash, Inc. (NASDAQ:FCFS).
Hedge fund activity in FirstCash, Inc. (NASDAQ:FCFS)
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the second quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in FCFS 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.
Among these funds, Renaissance Technologies held the most valuable stake in FirstCash, Inc. (NASDAQ:FCFS), which was worth $130.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $24.5 million worth of shares. Tudor Investment Corp, Citadel Investment Group, and D E Shaw 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 AlphaOne Capital Partners allocated the biggest weight to FirstCash, Inc. (NASDAQ:FCFS), around 0.33% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to FCFS.
As aggregate interest increased, key hedge funds have jumped into FirstCash, Inc. (NASDAQ:FCFS) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in FirstCash, Inc. (NASDAQ:FCFS). Point72 Asset Management had $1.1 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital and Karim Abbadi and Edward McBride's Centiva Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as FirstCash, Inc. (NASDAQ:FCFS) but similarly valued. We will take a look at Mattel, Inc. (NASDAQ:MAT), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Shake Shack Inc (NYSE:SHAK), and Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). This group of stocks' market caps match FCFS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAT,22,685143,6 SBGI,29,467906,-7 SHAK,26,607030,-1 CBRL,21,240229,-1 Average,24.5,500077,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $179 million in FCFS's case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks FirstCash, Inc. (NASDAQ:FCFS) is even less popular than CBRL. Hedge funds dodged a bullet by taking a bearish stance towards FCFS. 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 FCFS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FCFS investors were disappointed as the stock returned -11.5% 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.