Is Fidelity Southern Corporation (LION) A Good Stock To Buy?

Nina Todic

Sat, Jun 29, 2019, 8:10 PM

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Fidelity Southern Corporation (NASDAQ:LION).

Fidelity Southern Corporation (NASDAQ:LION) investors should pay attention to an increase in activity from the world's largest hedge funds recently. LION was in 12 hedge funds' portfolios at the end of March. There were 9 hedge funds in our database with LION holdings at the end of the previous quarter. Our calculations also showed that lion isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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 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.

We're going to go over the latest hedge fund action regarding Fidelity Southern Corporation (NASDAQ:LION).

How have hedgies been trading Fidelity Southern Corporation (NASDAQ:LION)?

At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in LION a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Mendon Capital Advisors was the largest shareholder of Fidelity Southern Corporation (NASDAQ:LION), with a stake worth $24.1 million reported as of the end of March. Trailing Mendon Capital Advisors was Castine Capital Management, which amassed a stake valued at $16.3 million. Renaissance Technologies, Basswood Capital, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, specific money managers were leading the bulls' herd. Basswood Capital, managed by Matthew Lindenbaum, assembled the biggest position in Fidelity Southern Corporation (NASDAQ:LION). Basswood Capital had $2.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $1.4 million investment in the stock during the quarter. The only other fund with a brand new LION position is Ken Griffin's Citadel Investment Group.

Let's go over hedge fund activity in other stocks similar to Fidelity Southern Corporation (NASDAQ:LION). We will take a look at Nanometrics Incorporated (NASDAQ:NANO), Global Brass and Copper Holdings Inc (NYSE:BRSS), WideOpenWest, Inc. (NYSE:WOW), and Lakeland Bancorp, Inc. (NASDAQ:LBAI). This group of stocks' market values are similar to LION's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NANO,16,101878,-3 BRSS,16,88966,1 WOW,11,21590,-2 LBAI,12,58117,0 Average,13.75,67638,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $58 million in LION's case. Nanometrics Incorporated (NASDAQ:NANO) is the most popular stock in this table. On the other hand WideOpenWest, Inc. (NYSE:WOW) is the least popular one with only 11 bullish hedge fund positions. Fidelity Southern Corporation (NASDAQ:LION) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on LION as the stock returned 12% during the same time frame and outperformed the market by an even larger margin.

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

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