Is FirstService Corporation (FSV) A Good Stock To Buy?
The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtFirstService Corporation (NASDAQ:FSV) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
FirstService Corporation (NASDAQ:FSV) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Silgan Holdings Inc. (NASDAQ:SLGN), The Middleby Corporation (NASDAQ:MIDD), and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) to gather more data points. Our calculations also showed that FSV isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most traders, hedge funds are seen as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, We choose to focus on the masters of this group, around 850 funds. It is estimated that this group of investors orchestrate bulk of the hedge fund industry's total capital, and by shadowing their highest performing picks, Insider Monkey has found numerous investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_193003" align="aligncenter" width="392"]
Chuck Royce of Royce & Associates[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's view the new hedge fund action surrounding FirstService Corporation (NASDAQ:FSV).
Hedge fund activity in FirstService Corporation (NASDAQ:FSV)
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FSV over the last 18 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.
The largest stake in FirstService Corporation (NASDAQ:FSV) was held by Renaissance Technologies, which reported holding $77.3 million worth of stock at the end of September. It was followed by Royce & Associates with a $17.5 million position. Other investors bullish on the company included Lionstone Capital Management, Millennium Management, and Islet Management. In terms of the portfolio weights assigned to each position Lionstone Capital Management allocated the biggest weight to FirstService Corporation (NASDAQ:FSV), around 9.75% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, dishing out 1.97 percent of its 13F equity portfolio to FSV.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Islet Management).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as FirstService Corporation (NASDAQ:FSV) but similarly valued. We will take a look at Silgan Holdings Inc. (NASDAQ:SLGN), The Middleby Corporation (NASDAQ:MIDD), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), and Manhattan Associates, Inc. (NASDAQ:MANH). This group of stocks' market caps are similar to FSV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLGN,16,176587,-1 MIDD,26,85040,-9 MNTA,36,666857,3 MANH,20,199741,-4 Average,24.5,282056,-2.75 [/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 $282 million. That figure was $137 million in FSV's case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand Silgan Holdings Inc. (NASDAQ:SLGN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks FirstService Corporation (NASDAQ:FSV) is even less popular than SLGN. Hedge funds clearly dropped the ball on FSV as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on FSV as the stock returned 30.9% in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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