Did Hedge Funds Make The Right Call On Ladder Capital Corp (LADR)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Ladder Capital Corp (NYSE:LADR) and determine whether hedge funds skillfully traded this stock.

Is Ladder Capital Corp (NYSE:LADR) the right investment to pursue these days? Prominent investors were buying. The number of long hedge fund positions improved by 6 in recent months. Our calculations also showed that LADR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a look at the fresh hedge fund action regarding Ladder Capital Corp (NYSE:LADR).

What have hedge funds been doing with Ladder Capital Corp (NYSE:LADR)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 55% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LADR over the last 18 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Millennium Management held the most valuable stake in Ladder Capital Corp (NYSE:LADR), which was worth $8.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $5.1 million worth of shares. Balyasny Asset Management, Winton Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Ladder Capital Corp (NYSE:LADR), around 0.84% of its 13F portfolio. Marathon Asset Management is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to LADR.

As aggregate interest increased, some big names have jumped into Ladder Capital Corp (NYSE:LADR) headfirst. Indaba Capital Management, managed by Derek C. Schrier, established the biggest position in Ladder Capital Corp (NYSE:LADR). Indaba Capital Management had $1.6 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Donald Sussman’s Paloma Partners, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ladder Capital Corp (NYSE:LADR) but similarly valued. We will take a look at Collier Creek Holdings (NYSE:CCH), Nicolet Bankshares Inc. (NASDAQ:NCBS), Abercrombie & Fitch Co. (NYSE:ANF), and SilverCrest Metals Inc. (NYSE:SILV). This group of stocks’ market values are similar to LADR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCH 14 125059 -2
NCBS 5 5413 0
ANF 23 163425 -3
SILV 9 34421 -2
Average 12.75 82080 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $27 million in LADR’s case. Abercrombie & Fitch Co. (NYSE:ANF) is the most popular stock in this table. On the other hand Nicolet Bankshares Inc. (NASDAQ:NCBS) is the least popular one with only 5 bullish hedge fund positions. Ladder Capital Corp (NYSE:LADR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on LADR as the stock returned 59% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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