Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in FirstService Corporation (TSE:FSV)? The smart money sentiment can provide an answer to this question.
Why do we pay any attention at all to hedge fund sentiment? 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's review the new hedge fund action encompassing FirstService Corporation (TSE:FSV).
Hedge fund activity in FirstService Corporation (TSE:FSV)
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FSV over the last 13 quarters. So, let's examine 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 FirstService Corporation (TSE:FSV), which was worth $76 million at the end of the third quarter. On the second spot was Lionstone Capital Management which amassed $21 million worth of shares. Moreover, Royce & Associates, Waratah Capital Advisors, and Arrowstreet Capital were also bullish on FirstService Corporation (TSE:FSV), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have jumped into FirstService Corporation (TSE:FSV) headfirst. Skye Global Management, managed by Jaime Sterne, created the most valuable position in FirstService Corporation (TSE:FSV). Skye Global Management had $1.8 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $0.7 million position during the quarter. The following funds were also among the new FSV investors: D. E. Shaw's D E Shaw and Ken Griffin's Citadel Investment Group.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as FirstService Corporation (NASDAQ:FSV) but similarly valued. These stocks are Sunoco LP (NYSE:SUN), USANA Health Sciences, Inc. (NYSE:USNA), CVR Refining LP (NYSE:CVRR), and First Financial Bancorp (NASDAQ:FFBC). All of these stocks' market caps match FSV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SUN,7,16705,-1 USNA,16,413764,0 CVRR,2,113511,-4 FFBC,7,20139,-2 Average,8,141030,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $144 million in FSV's case. USANA Health Sciences, Inc. (NYSE:USNA) is the most popular stock in this table. On the other hand CVR Refining LP (NYSE:CVRR) is the least popular one with only 2 bullish hedge fund positions. FirstService Corporation (NASDAQ:FSV) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard USNA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.