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Hedge Funds Are Dumping Franco-Nevada Corporation (FNV)

·6 min read

In this article you are going to find out whether hedge funds think Franco-Nevada Corporation (NYSE:FNV) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Franco-Nevada Corporation (NYSE:FNV) investors should pay attention to a decrease in hedge fund interest of late. Franco-Nevada Corporation (NYSE:FNV) was in 20 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that FNV isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Eric Sprott Sprott Asset Management
Eric Sprott Sprott Asset Management

Eric Sprott of Sprott Asset Management

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. Now we're going to take a peek at the new hedge fund action regarding Franco-Nevada Corporation (NYSE:FNV).

Do Hedge Funds Think FNV Is A Good Stock To Buy Now?

At the end of March, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FNV over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Franco-Nevada Corporation (NYSE:FNV) was held by Renaissance Technologies, which reported holding $606.1 million worth of stock at the end of December. It was followed by Horizon Asset Management with a $96.2 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and Sprott Asset Management. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to Franco-Nevada Corporation (NYSE:FNV), around 3.69% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 3.06 percent of its 13F equity portfolio to FNV.

Since Franco-Nevada Corporation (NYSE:FNV) has faced falling interest from hedge fund managers, it's easy to see that there were a few money managers that decided to sell off their full holdings last quarter. It's worth mentioning that Paul Singer's Elliott Investment Management dropped the largest stake of the "upper crust" of funds followed by Insider Monkey, totaling close to $6.3 million in stock. Michael Gelband's fund, ExodusPoint Capital, also dumped its stock, about $2.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Franco-Nevada Corporation (NYSE:FNV) but similarly valued. We will take a look at Fortive Corporation (NYSE:FTV), The Hartford Financial Services Group Inc (NYSE:HIG), Itau Unibanco Holding SA (NYSE:ITUB), Trip.com Group Limited (NASDAQ:TCOM), United Rentals, Inc. (NYSE:URI), Canon Inc. (NYSE:CAJ), and Synchrony Financial (NYSE:SYF). This group of stocks' market valuations match FNV's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTV,27,1696539,-6 HIG,57,1860836,21 ITUB,12,180456,-7 TCOM,35,2144297,1 URI,41,1021749,-5 CAJ,9,59274,2 SYF,49,1861601,-1 Average,32.9,1260679,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $1261 million. That figure was $933 million in FNV's case. The Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 9 bullish hedge fund positions. Franco-Nevada Corporation (NYSE:FNV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FNV is 28.8. 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 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 still beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on FNV as the stock returned 20.3% since the end of the first quarter (through 7/16) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.