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Were Hedge Funds Right About Formula One Group (FWONK)?

Reymerlyn Martin

Does Formula One Group (NASDAQ:FWONK) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Hedge fund interest in Formula One Group (NASDAQ:FWONK) 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 FWONK to other stocks including Interpublic Group of Companies Inc (NYSE:IPG), Farfetch Limited (NYSE:FTCH), and The Western Union Company (NYSE:WU) to get a better sense of its popularity.

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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Och-Ziff Capital Management

We're going to take a glance at the key hedge fund action regarding Formula One Group (NASDAQ:FWONK).

What have hedge funds been doing with Formula One Group (NASDAQ:FWONK)?

Heading into the second quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FWONK over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

FWONK_jun2019

The largest stake in Formula One Group (NASDAQ:FWONK) was held by Viking Global, which reported holding $409 million worth of stock at the end of March. It was followed by Eminence Capital with a $328.1 million position. Other investors bullish on the company included Ashe Capital, OZ Management, and Southeastern Asset Management.

Because Formula One Group (NASDAQ:FWONK) has witnessed bearish sentiment from the smart money, logic holds that there was a specific group of hedgies who sold off their full holdings last quarter. At the top of the heap, John H. Scully's SPO Advisory Corp said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling about $214.2 million in stock. Clint Carlson's fund, Carlson Capital, also said goodbye to its stock, about $5.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to Formula One Group (NASDAQ:FWONK). These stocks are Interpublic Group of Companies Inc (NYSE:IPG), Farfetch Limited (NYSE:FTCH), The Western Union Company (NYSE:WU), and IPG Photonics Corporation (NASDAQ:IPGP). This group of stocks' market caps match FWONK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IPG,26,853779,-3 FTCH,43,558624,25 WU,20,416982,-6 IPGP,13,120021,-3 Average,25.5,487352,3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $487 million. That figure was $1781 million in FWONK's case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand IPG Photonics Corporation (NASDAQ:IPGP) is the least popular one with only 13 bullish hedge fund positions. Formula One Group (NASDAQ:FWONK) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on FWONK as the stock returned 7.4% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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