FII: Adding Federated Investors to Investing Ideas (Long Side)

Takeaway: We are adding Federated Investors (FII) to Investing Ideas.

Editor's Note: Our Financials analyst Jonathan Casteleyn will send subscribers a full research report next week explaining our bullish thesis on the stock. In the meantime, below is a note written by Hedgeye CEO Keith McCullough this afternoon.

 

FII: Adding Federated Investors to Investing Ideas (Long Side) - f xx

 

While US Equities continue their daily debate as to whether or not they are doing to be "down" for 2015 (the Russell 2000 is), one very obvious TREND has emerged from a fund flow perspective - Cash Is King.

 

One way to invest in the market share gains of Money Market Funds (vs. US domestic equity mutual funds) is long Federated Investors. Our analyst, Jonathan Casteleyn continues to think this is a misunderstood story.

 

In the 5-day period ending November 11th, investors continued to pull capital from active domestic mutual funds, withdrawing -$2.4 billion last week which have now amounted to a total drawdown of -$139.9 billion so far in 2015 (the worst start to a year for domestic equity funds in all ICI data). 

 

Meanwhile, investors also shored up +$12 billion of cash in money market funds, continuing the trend of inflows in the second half of 2015. This brings cumulative 4Q15TD money market flows to +$45 billion, following the 3Q15 inflow of +$54 billion. 


Casteleyn continues to like the cash management space and out of favor Federated Investors on a combination of positive balance builds and profitability improvements in the business for '16/'17.

 

Here's a buy signal (on red) with the stock -1.4% today,

 

KM 


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