Do Hedge Funds Love FedNat Holding Company (FNHC)?

Does FedNat Holding Company (NASDAQ:FNHC) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

FedNat Holding Company (NASDAQ:FNHC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. At the end of this article we will also compare FNHC to other stocks including Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), Evans Bancorp Inc. (NYSEAMERICAN:EVBN), and CorMedix Inc. (NYSEAMERICAN:CRMD) to get a better sense of its popularity.
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At the moment there are numerous indicators stock traders use to value stocks. A pair of the most useful indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top money managers can outclass their index-focused peers by a superb margin (see the details here).

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. 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 already gained 20 percent. Now let’s go over the latest hedge fund action surrounding FedNat Holding Company (NASDAQ:FNHC).

How have hedgies been trading FedNat Holding Company (NASDAQ:FNHC)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FNHC over the last 17 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in FedNat Holding Company (NASDAQ:FNHC), which was worth $11 million at the end of the third quarter. On the second spot was Capital Returns Management which amassed $10.5 million worth of shares. GLG Partners, Millennium Management, and Two Sigma Advisors 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 Capital Returns Management allocated the biggest weight to FedNat Holding Company (NASDAQ:FNHC), around 17.27% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to FNHC.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Bailard Inc. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let’s now take a look at hedge fund activity in other stocks similar to FedNat Holding Company (NASDAQ:FNHC). We will take a look at Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), Evans Bancorp Inc. (NYSEAMERICAN:EVBN), CorMedix Inc. (NYSEAMERICAN:CRMD), and Affimed NV (NASDAQ:AFMD). This group of stocks’ market caps are closest to FNHC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FOMX 12 59402 -1
EVBN 3 5829 1
CRMD 6 7358 3
AFMD 11 19629 1
Average 8 23055 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $25 million in FNHC’s case. Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) is the most popular stock in this table. On the other hand Evans Bancorp Inc. (NYSEAMERICAN:EVBN) is the least popular one with only 3 bullish hedge fund positions. FedNat Holding Company (NASDAQ:FNHC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on FNHC, though not to the same extent, as the stock returned 7.3% during the first two months of the fourth quarter and outperformed the market.

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