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Were Hedge Funds Right About FBL Financial Group (FFG)?

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Debasis Saha
·6 min read
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Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is FBL Financial Group (NYSE:FFG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

FBL Financial Group (NYSE:FFG) has experienced a decrease in enthusiasm from smart money in recent months. FFG was in 7 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 9 hedge funds in our database with FFG positions at the end of the previous quarter. Our calculations also showed that FFG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

[caption id="attachment_189632" align="aligncenter" width="400"]

David Harding
David Harding

David Harding of Winton Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader's corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's review the latest hedge fund action regarding FBL Financial Group (NYSE:FFG).

How have hedgies been trading FBL Financial Group (NYSE:FFG)?

At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FFG over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is FFG A Good Stock To Buy?
Is FFG A Good Stock To Buy?

More specifically, Royce & Associates was the largest shareholder of FBL Financial Group (NYSE:FFG), with a stake worth $9 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $6.3 million. Millennium Management, Citadel Investment Group, and Winton Capital 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 Royce & Associates allocated the biggest weight to FBL Financial Group (NYSE:FFG), around 0.08% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, setting aside 0.07 percent of its 13F equity portfolio to FFG.

Since FBL Financial Group (NYSE:FFG) has experienced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of hedge funds that decided to sell off their positions entirely last quarter. It's worth mentioning that Michael Gelband's ExodusPoint Capital cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, comprising close to $0.3 million in stock, and Ran Pang's Quantamental Technologies was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as FBL Financial Group (NYSE:FFG) but similarly valued. These stocks are NGL Energy Partners LP (NYSE:NGL), Gentherm Inc (NASDAQ:THRM), Cooper Tire & Rubber Company (NYSE:CTB), and Amneal Pharmaceuticals, Inc. (NYSE:AMRX). This group of stocks' market valuations resemble FFG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NGL,4,25138,0 THRM,17,71382,1 CTB,17,159040,-2 AMRX,10,17650,0 Average,12,68303,-0.25 [/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 $68 million. That figure was $21 million in FFG's case. Gentherm Inc (NASDAQ:THRM) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 4 bullish hedge fund positions. FBL Financial Group (NYSE:FFG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately FFG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FFG investors were disappointed as the stock returned -29.3% during the same time 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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