Is Fair Isaac Corporation (NYSE:FICO) a good equity to bet on 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.
Fair Isaac Corporation (NYSE:FICO) was in 34 hedge funds' portfolios at the end of the second quarter of 2019. FICO investors should pay attention to an increase in support from the world's most elite money managers of late. There were 27 hedge funds in our database with FICO holdings at the end of the previous quarter. Our calculations also showed that FICO isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the key hedge fund action surrounding Fair Isaac Corporation (NYSE:FICO).
What does smart money think about Fair Isaac Corporation (NYSE:FICO)?
Heading into the third quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FICO over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Fair Isaac Corporation (NYSE:FICO) was held by Newbrook Capital Advisors, which reported holding $119.6 million worth of stock at the end of March. It was followed by AQR Capital Management with a $99 million position. Other investors bullish on the company included Royce & Associates, Fisher Asset Management, and Broad Bay Capital.
As one would reasonably expect, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Fair Isaac Corporation (NYSE:FICO). Marshall Wace LLP had $20.3 million invested in the company at the end of the quarter. Guy Shahar's DSAM Partners also initiated a $10.4 million position during the quarter. The following funds were also among the new FICO investors: Dmitry Balyasny's Balyasny Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Renaissance Technologies.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Fair Isaac Corporation (NYSE:FICO) but similarly valued. These stocks are Booz Allen Hamilton Holding Corporation (NYSE:BAH), American Financial Group, Inc. (NYSE:AFG), Ubiquiti Networks Inc (NASDAQ:UBNT), and Juniper Networks, Inc. (NYSE:JNPR). This group of stocks' market valuations match FICO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAH,31,369488,12 AFG,22,366752,-8 UBNT,17,505790,0 JNPR,28,700453,4 Average,24.5,485621,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $486 million. That figure was $731 million in FICO's case. Booz Allen Hamilton Holding Corporation (NYSE:BAH) is the most popular stock in this table. On the other hand Ubiquiti Networks Inc (NASDAQ:UBNT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Fair Isaac Corporation (NYSE:FICO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FICO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FICO were disappointed as the stock returned -3.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.