Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Francesca's Holdings Corp (NASDAQ:FRAN) based on that data.
Francesca's Holdings Corp (NASDAQ:FRAN) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare FRAN to other stocks including iMedia Brands, Inc. (NASDAQ:IMBI), Riot Blockchain, Inc (NASDAQ:RIOT), and Deswell Industries, Inc. (NASDAQ:DSWL) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_224708" align="aligncenter" width="464"] New York Stock Exchange[/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. We're going to take a look at the latest hedge fund action surrounding Francesca's Holdings Corp (NASDAQ:FRAN).
How are hedge funds trading Francesca's Holdings Corp (NASDAQ:FRAN)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 12 hedge funds with a bullish position in FRAN a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Francesca's Holdings Corp (NASDAQ:FRAN), with a stake worth $1.5 million reported as of the end of September. Trailing Renaissance Technologies was Shah Capital Management, which amassed a stake valued at $1 million. DC Capital Partners, Royce & Associates, and Ancora Advisors 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 DC Capital Partners allocated the biggest weight to Francesca's Holdings Corp (NASDAQ:FRAN), around 0.86% of its 13F portfolio. Shah Capital Management is also relatively very bullish on the stock, dishing out 0.53 percent of its 13F equity portfolio to FRAN.
Due to the fact that Francesca's Holdings Corp (NASDAQ:FRAN) has faced bearish sentiment from the smart money, it's safe to say that there lies a certain "tier" of fund managers who sold off their entire stakes heading into Q4. It's worth mentioning that Cliff Asness's AQR Capital Management cut the biggest stake of the 750 funds monitored by Insider Monkey, valued at close to $0.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also said goodbye to its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Francesca's Holdings Corp (NASDAQ:FRAN) but similarly valued. These stocks are iMedia Brands, Inc. (NASDAQ:IMBI), Riot Blockchain, Inc (NASDAQ:RIOT), Deswell Industries, Inc. (NASDAQ:DSWL), and Outlook Therapeutics, Inc. (NASDAQ:OTLK). This group of stocks' market values resemble FRAN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMBI,4,2312,1 RIOT,1,117,0 DSWL,2,108,1 OTLK,3,133,0 Average,2.5,668,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $6 million in FRAN's case. iMedia Brands, Inc. (NASDAQ:IMBI) is the most popular stock in this table. On the other hand Riot Blockchain, Inc (NASDAQ:RIOT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Francesca's Holdings Corp (NASDAQ:FRAN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on FRAN as the stock returned 11.2% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.