Do Hedge Funds Love Ship Finance International Limited (SFL)?

The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Ship Finance International Limited (NYSE:SFL) based on those filings.

Ship Finance International Limited (NYSE:SFL) was in 12 hedge funds’ portfolios at the end of the third quarter of 2018. SFL has seen a decrease in enthusiasm from smart money lately. There were 16 hedge funds in our database with SFL holdings at the end of the previous quarter. Our calculations also showed that sfl isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Clint Carlson, Carlson Capital

We’re going to take a peek at the recent hedge fund action surrounding Ship Finance International Limited (NYSE:SFL).

What does the smart money think about Ship Finance International Limited (NYSE:SFL)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in SFL at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SFL Positions

More specifically, Carlson Capital was the largest shareholder of Ship Finance International Limited (NYSE:SFL), with a stake worth $17.8 million reported as of the end of September. Trailing Carlson Capital was Arrowstreet Capital, which amassed a stake valued at $12.4 million. GLG Partners, Renaissance Technologies, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Since Ship Finance International Limited (NYSE:SFL) has faced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of fund managers that elected to cut their full holdings last quarter. Intriguingly, Glenn Russell Dubin’s Highbridge Capital Management dropped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $22.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Ship Finance International Limited (NYSE:SFL). These stocks are Apptio, Inc. (NASDAQ:APTI), Cosan Limited (NYSE:CZZ), Fresh Del Monte Produce Inc (NYSE:FDP), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks’ market valuations resemble SFL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APTI 25 321667 5
CZZ 13 97937 -4
FDP 14 38046 3
PFS 8 50269 1
Average 15 126980 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $65 million in SFL’s case. Apptio, Inc. (NASDAQ:APTI) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 8 bullish hedge fund positions. Ship Finance International Limited (NYSE:SFL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard APTI might be a better candidate to consider a long position.

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