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Hedge Funds Have Never Been More Bullish On FutureFuel Corp. (FF)

Reymerlyn Martin

We can judge whether FutureFuel Corp. (NYSE:FF) 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.

FutureFuel Corp. (NYSE:FF) investors should be aware of an increase in hedge fund sentiment of late. FF was in 15 hedge funds' portfolios at the end of March. There were 14 hedge funds in our database with FF positions at the end of the previous quarter. Our calculations also showed that FF isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

We're going to check out the new hedge fund action encompassing FutureFuel Corp. (NYSE:FF).

How are hedge funds trading FutureFuel Corp. (NYSE:FF)?

At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in FF over the last 15 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

FF_jun2019

Among these funds, Renaissance Technologies held the most valuable stake in FutureFuel Corp. (NYSE:FF), which was worth $28.7 million at the end of the first quarter. On the second spot was Royce & Associates which amassed $11.1 million worth of shares. Moreover, GLG Partners, Arrowstreet Capital, and AQR Capital Management were also bullish on FutureFuel Corp. (NYSE:FF), allocating a large percentage of their portfolios to this stock.

Consequently, some big names were breaking ground themselves. Winton Capital Management, managed by David Harding, established the largest position in FutureFuel Corp. (NYSE:FF). Winton Capital Management had $0.7 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $0.3 million position during the quarter.

Let's now review hedge fund activity in other stocks similar to FutureFuel Corp. (NYSE:FF). These stocks are Plug Power, Inc. (NASDAQ:PLUG), Mobileiron Inc (NASDAQ:MOBL), The Manitowoc Company, Inc. (NYSE:MTW), and Midland States Bancorp, Inc. (NASDAQ:MSBI). All of these stocks' market caps match FF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLUG,7,43583,1 MOBL,17,126183,1 MTW,20,113807,6 MSBI,4,1643,-3 Average,12,71304,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $54 million in FF's case. The Manitowoc Company, Inc. (NYSE:MTW) is the most popular stock in this table. On the other hand Midland States Bancorp, Inc. (NASDAQ:MSBI) is the least popular one with only 4 bullish hedge fund positions. FutureFuel Corp. (NYSE:FF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately FF wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FF were disappointed as the stock returned -18.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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