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We can judge whether FBL Financial Group, Inc. (NYSE:FFG) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is FBL Financial Group, Inc. (NYSE:FFG) a good investment today? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions moved up by 1 lately. Our calculations also showed that FFG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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David Harding of Winton Capital Management[/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 fresh hedge fund action encompassing FBL Financial Group, Inc. (NYSE:FFG).
How are hedge funds trading FBL Financial Group, Inc. (NYSE:FFG)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FFG over the last 17 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the number one position in FBL Financial Group, Inc. (NYSE:FFG). Royce & Associates has a $6.4 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $5.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism consist of David Harding's Winton Capital Management, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Caxton Associates allocated the biggest weight to FBL Financial Group, Inc. (NYSE:FFG), around 0.11% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to FFG.
As one would reasonably expect, key money managers were leading the bulls' herd. ExodusPoint Capital, managed by Michael Gelband, created the biggest position in FBL Financial Group, Inc. (NYSE:FFG). ExodusPoint Capital had $0.3 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as FBL Financial Group, Inc. (NYSE:FFG) but similarly valued. These stocks are TPG RE Finance Trust, Inc. (NYSE:TRTX), Tootsie Roll Industries, Inc. (NYSE:TR), Core-Mark Holding Company, Inc. (NASDAQ:CORE), and Upwork Inc. (NASDAQ:UPWK). This group of stocks' market valuations are closest to FFG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRTX,10,45884,1 TR,17,92174,4 CORE,18,50919,-6 UPWK,19,122995,9 Average,16,77993,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $17 million in FFG's case. Upwork Inc. (NASDAQ:UPWK) is the most popular stock in this table. On the other hand TPG RE Finance Trust, Inc. (NYSE:TRTX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks FBL Financial Group, Inc. (NYSE:FFG) is even less popular than TRTX. Hedge funds dodged a bullet by taking a bearish stance towards FFG. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FFG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FFG investors were disappointed as the stock returned -3.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.