We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of FirstCash, Inc. (NASDAQ:FCFS) based on that data.
Hedge fund interest in FirstCash, Inc. (NASDAQ:FCFS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare FCFS to other stocks including Anixter International Inc. (NYSE:AXE), Emergent Biosolutions Inc (NYSE:EBS), and NIO Inc. (NYSE:NIO) to get a better sense of its popularity. Video: 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' 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 PayPal alternatives for international payments to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind let's analyze the fresh hedge fund action surrounding FirstCash, Inc. (NASDAQ:FCFS).
How have hedgies been trading FirstCash, Inc. (NASDAQ:FCFS)?
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in FCFS a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of FirstCash, Inc. (NASDAQ:FCFS), with a stake worth $70.1 million reported as of the end of September. Trailing Renaissance Technologies was Hosking Partners, which amassed a stake valued at $12.4 million. Citadel Investment Group, GLG Partners, and Millennium Management 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 Hosking Partners allocated the biggest weight to FirstCash, Inc. (NASDAQ:FCFS), around 0.43% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to FCFS.
Judging by the fact that FirstCash, Inc. (NASDAQ:FCFS) has experienced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few fund managers that elected to cut their positions entirely by the end of the first quarter. Interestingly, Paul Tudor Jones's Tudor Investment Corp dumped the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $2.8 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund said goodbye to about $0.7 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to FirstCash, Inc. (NASDAQ:FCFS). These stocks are Anixter International Inc. (NYSE:AXE), Emergent Biosolutions Inc (NYSE:EBS), NIO Inc. (NYSE:NIO), and frontdoor, inc. (NASDAQ:FTDR). This group of stocks' market values are similar to FCFS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AXE,21,541008,-22 EBS,17,114485,5 NIO,16,29111,0 FTDR,33,552969,-4 Average,21.75,309393,-5.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $107 million in FCFS's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks FirstCash, Inc. (NASDAQ:FCFS) is even less popular than NIO. Hedge funds dodged a bullet by taking a bearish stance towards FCFS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately FCFS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); FCFS investors were disappointed as the stock returned -3.5% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.