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2019 Review: Most Favored Hedge Fund Stocks vs. HollyFrontier Corporation (HFC)

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is HollyFrontier Corporation (NYSE:HFC) a great stock to buy now? Money managers are turning bullish. The number of bullish hedge fund bets moved up by 2 recently. Our calculations also showed that HFC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the eyes of most investors, hedge funds are perceived as unimportant, outdated investment vehicles of the past. While there are greater than 8000 funds trading at the moment, We hone in on the masters of this group, about 750 funds. These hedge fund managers administer most of the smart money’s total capital, and by tracking their unrivaled picks, Insider Monkey has deciphered several investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let’s analyze the latest hedge fund action surrounding HollyFrontier Corporation (NYSE:HFC).

What does smart money think about HollyFrontier Corporation (NYSE:HFC)?

Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HFC over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Cliff Asness’s AQR Capital Management has the largest position in HollyFrontier Corporation (NYSE:HFC), worth close to $182.6 million, amounting to 0.2% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $75.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain David E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Todd J. Kantor’s Encompass Capital Advisors. In terms of the portfolio weights assigned to each position Encompass Capital Advisors allocated the biggest weight to HollyFrontier Corporation (NYSE:HFC), around 2.89% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 1.39 percent of its 13F equity portfolio to HFC.

As one would reasonably expect, some big names were breaking ground themselves. PDT Partners, managed by Peter Muller, established the most valuable position in HollyFrontier Corporation (NYSE:HFC). PDT Partners had $11.5 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $4 million investment in the stock during the quarter. The other funds with brand new HFC positions are Steve Pattyn’s Yaupon Capital, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Mike Vranos’s Ellington.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as HollyFrontier Corporation (NYSE:HFC) but similarly valued. These stocks are Kimco Realty Corp (NYSE:KIM), AGNC Investment Corp. (NASDAQ:AGNC), MGM Growth Properties LLC (NYSE:MGP), and Fair Isaac Corporation (NYSE:FICO). This group of stocks’ market caps are closest to HFC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KIM 11 100029 -8
AGNC 15 126937 -8
MGP 18 307511 4
FICO 40 873383 6
Average 21 351965 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $544 million in HFC’s case. Fair Isaac Corporation (NYSE:FICO) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 11 bullish hedge fund positions. HollyFrontier Corporation (NYSE:HFC) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately HFC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HFC were disappointed as the stock returned 1.9% in 2019 and trailed 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 many of these stocks already outperformed the market so far this year.
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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