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Hedge Funds Are Buying Frontline Ltd (FRO)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Frontline Ltd (NYSE:FRO).

Is Frontline Ltd (NYSE:FRO) a buy here? Hedge funds are buying. The number of bullish hedge fund bets rose by 3 lately. Our calculations also showed that FRO 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 methods stock traders use to size up publicly traded companies. A duo of the most under-the-radar methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite fund managers can outperform the market by a superb amount (see the details here).

FRO_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. We’re going to take a peek at the key hedge fund action encompassing Frontline Ltd (NYSE:FRO).

Hedge fund activity in Frontline Ltd (NYSE:FRO)

At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the first quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in FRO a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Crispin Odey

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Crispin Odey’s Odey Asset Management Group has the largest position in Frontline Ltd (NYSE:FRO), worth close to $30.3 million, corresponding to 2.6% of its total 13F portfolio. On Odey Asset Management Group’s heels is Renaissance Technologies, which holds a $15 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism contain Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.

As aggregate interest increased, some big names have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the most outsized position in Frontline Ltd (NYSE:FRO). Tudor Investment Corp had $0.5 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital and Noam Gottesman’s GLG Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Frontline Ltd (NYSE:FRO) but similarly valued. These stocks are GreenTree Hospitality Group Ltd. (NYSE:GHG), Mobile Mini Inc (NASDAQ:MINI), Career Education Corp. (NASDAQ:CECO), and Viad Corp (NYSE:VVI). This group of stocks’ market valuations are similar to FRO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GHG 5 31776 -4
MINI 15 91898 1
CECO 22 216393 0
VVI 16 120247 3
Average 14.5 115079 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $77 million in FRO’s case. Career Education Corp. (NASDAQ:CECO) is the most popular stock in this table. On the other hand GreenTree Hospitality Group Ltd. (NYSE:GHG) is the least popular one with only 5 bullish hedge fund positions. Frontline Ltd (NYSE:FRO) 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 FRO as the stock returned 13.8% 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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