We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Four Corners Property Trust, Inc. (NYSE:FCPT).
Is Four Corners Property Trust, Inc. (NYSE:FCPT) going to take off soon? Hedge funds are in a pessimistic mood. The number of bullish hedge fund bets were cut by 3 recently. Our calculations also showed that FCPT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 41 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the recent hedge fund action encompassing Four Corners Property Trust, Inc. (NYSE:FCPT).
How are hedge funds trading Four Corners Property Trust, Inc. (NYSE:FCPT)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the third quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in FCPT a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Marshall Wace LLP was the largest shareholder of Four Corners Property Trust, Inc. (NYSE:FCPT), with a stake worth $15.8 million reported as of the end of September. Trailing Marshall Wace LLP was Millennium Management, which amassed a stake valued at $14.5 million. Echo Street Capital Management, Balyasny Asset Management, and Impax Asset Management 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 Waterfront Capital Partners allocated the biggest weight to Four Corners Property Trust, Inc. (NYSE:FCPT), around 1.02% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.41 percent of its 13F equity portfolio to FCPT.
Due to the fact that Four Corners Property Trust, Inc. (NYSE:FCPT) has faced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedge funds that decided to sell off their full holdings last quarter. At the top of the heap, Clint Carlson’s Carlson Capital dumped the largest position of the 750 funds monitored by Insider Monkey, totaling an estimated $30.4 million in stock. Renaissance Technologies, also cut its stock, about $1.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Four Corners Property Trust, Inc. (NYSE:FCPT) but similarly valued. We will take a look at Coeur d’Alene Mines Corporation (NYSE:CDE), Harmony Gold Mining Co. (NYSE:HMY), United States Steel Corporation (NYSE:X), and Capitol Federal Financial, Inc. (NASDAQ:CFFN). This group of stocks’ market caps match FCPT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $91 million in FCPT’s case. United States Steel Corporation (NYSE:X) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 12 bullish hedge fund positions. Four Corners Property Trust, Inc. (NYSE:FCPT) 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. 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. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately FCPT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FCPT investors were disappointed as the stock returned -40% during the same time period and underperformed 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 most of these stocks already outperformed the market in 2020.
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.