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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Fortune Brands Home & Security Inc (NYSE:FBHS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Fortune Brands Home & Security Inc (NYSE:FBHS) was in 23 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 37. FBHS shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. There were 30 hedge funds in our database with FBHS positions at the end of the fourth quarter. Our calculations also showed that FBHS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to go over the recent hedge fund action surrounding Fortune Brands Home & Security Inc (NYSE:FBHS).
Do Hedge Funds Think FBHS Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in FBHS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Fortune Brands Home & Security Inc (NYSE:FBHS) was held by Holocene Advisors, which reported holding $103.9 million worth of stock at the end of December. It was followed by AQR Capital Management with a $66.3 million position. Other investors bullish on the company included Junto Capital Management, Giverny Capital, and GAMCO Investors. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to Fortune Brands Home & Security Inc (NYSE:FBHS), around 5.34% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, earmarking 3.36 percent of its 13F equity portfolio to FBHS.
Seeing as Fortune Brands Home & Security Inc (NYSE:FBHS) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Anand Parekh's Alyeska Investment Group cut the largest stake of the "upper crust" of funds followed by Insider Monkey, totaling about $21.5 million in stock, and Clint Carlson's Carlson Capital was right behind this move, as the fund dumped about $13.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 7 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Fortune Brands Home & Security Inc (NYSE:FBHS). We will take a look at PPD, Inc. (NASDAQ:PPD), Hasbro, Inc. (NASDAQ:HAS), Godaddy Inc (NYSE:GDDY), Korea Electric Power Corporation (NYSE:KEP), iQIYI, Inc. (NASDAQ:IQ), Crown Holdings, Inc. (NYSE:CCK), and Oak Street Health, Inc. (NYSE:OSH). This group of stocks' market caps are closest to FBHS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PPD,29,822954,0 HAS,31,277091,-5 GDDY,39,2366731,-5 KEP,4,19253,-3 IQ,40,1361640,10 CCK,60,2028362,-3 OSH,31,602957,-3 Average,33.4,1068427,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1068 million. That figure was $435 million in FBHS's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 4 bullish hedge fund positions. Fortune Brands Home & Security Inc (NYSE:FBHS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FBHS is 33.6. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately FBHS wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); FBHS investors were disappointed as the stock returned -0.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.