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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 Funko, Inc. (NASDAQ:FNKO).
Is FNKO a good stock to buy now? Funko, Inc. (NASDAQ:FNKO) has experienced an increase in support from the world's most elite money managers recently. Funko, Inc. (NASDAQ:FNKO) was in 8 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 23. There were 7 hedge funds in our database with FNKO holdings at the end of June. Our calculations also showed that FNKO 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's view the latest hedge fund action surrounding Funko, Inc. (NASDAQ:FNKO).
Hedge fund activity in Funko, Inc. (NASDAQ:FNKO)
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in FNKO a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Woodson Capital Management held the most valuable stake in Funko, Inc. (NASDAQ:FNKO), which was worth $13.4 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $2.4 million worth of shares. PDT Partners, Balyasny Asset Management, 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 Woodson Capital Management allocated the biggest weight to Funko, Inc. (NASDAQ:FNKO), around 0.76% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to FNKO.
As one would reasonably expect, key money managers have been driving this bullishness. PDT Partners, managed by Peter Muller, assembled the most valuable position in Funko, Inc. (NASDAQ:FNKO). PDT Partners had $0.5 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $0.4 million investment in the stock during the quarter. The other funds with brand new FNKO positions are Israel Englander's Millennium Management, Michael Gelband's ExodusPoint Capital, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Funko, Inc. (NASDAQ:FNKO) but similarly valued. We will take a look at Peapack-Gladstone Financial Corp (NASDAQ:PGC), Affimed NV (NASDAQ:AFMD), Aldeyra Therapeutics Inc (NASDAQ:ALDX), Orphazyme A/S (NASDAQ:ORPH), Sunlands Technology Group (NYSE:STG), Landec Corporation (NASDAQ:LNDC), and Itamar Medical Ltd. (NASDAQ:ITMR). This group of stocks' market valuations match FNKO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PGC,16,33214,-1 AFMD,16,60539,2 ALDX,17,102739,-2 ORPH,5,20668,5 STG,1,131,-1 LNDC,14,74381,-1 ITMR,9,38617,-1 Average,11.1,47184,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $17 million in FNKO's case. Aldeyra Therapeutics Inc (NASDAQ:ALDX) is the most popular stock in this table. On the other hand Sunlands Technology Group (NYSE:STG) is the least popular one with only 1 bullish hedge fund positions. Funko, Inc. (NASDAQ:FNKO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FNKO is 38.3. 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. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on FNKO as the stock returned 64.1% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.