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Did Hedge Funds Drop The Ball On Fly Leasing Ltd (FLY) ?

Is Fly Leasing Ltd (NYSE:FLY) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Fly Leasing Ltd (NYSE:FLY) was in 7 hedge funds’ portfolios at the end of the second quarter of 2019. FLY shareholders have witnessed a decrease in hedge fund sentiment of late. There were 8 hedge funds in our database with FLY holdings at the end of the previous quarter. Our calculations also showed that FLY isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

FLY_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the recent hedge fund action encompassing Fly Leasing Ltd (NYSE:FLY).

Hedge fund activity in Fly Leasing Ltd (NYSE:FLY)

Heading into the third quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in FLY a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Nathaniel August - Mangrove Partners

More specifically, Mangrove Partners was the largest shareholder of Fly Leasing Ltd (NYSE:FLY), with a stake worth $22.5 million reported as of the end of March. Trailing Mangrove Partners was Millennium Management, which amassed a stake valued at $8.5 million. D E Shaw, Renaissance Technologies, and PEAK6 Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Fly Leasing Ltd (NYSE:FLY) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that slashed their entire stakes in the second quarter. Intriguingly, Richard Rubin’s Hawkeye Capital cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth about $3.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $3.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds in the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Fly Leasing Ltd (NYSE:FLY) but similarly valued. We will take a look at Peoples Utah Bancorp (NASDAQ:PUB), International Money Express, Inc. (NASDAQ:IMXI), Digimarc Corp (NASDAQ:DMRC), and Maxar Technologies Inc. (NYSE:MAXR). All of these stocks’ market caps resemble FLY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PUB 3 15043 -2
IMXI 12 97748 1
DMRC 6 50230 3
MAXR 12 43172 5
Average 8.25 51548 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $45 million in FLY’s case. International Money Express, Inc. (NASDAQ:IMXI) is the most popular stock in this table. On the other hand Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only 3 bullish hedge fund positions. Fly Leasing Ltd (NYSE:FLY) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FLY as the stock returned 17.8% 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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