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Hedge Funds Aren’t Crazy About Safehold Inc. (SAFE) Anymore

In this article we will take a look at whether hedge funds think Safehold Inc. (NYSE:SAFE) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Safehold Inc. (NYSE:SAFE) investors should pay attention to a decrease in hedge fund sentiment of late. Our calculations also showed that SAFE 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

NAVELLIER & ASSOCIATES

Louis Navellier of Navellier & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action regarding Safehold Inc. (NYSE:SAFE).

What does smart money think about Safehold Inc. (NYSE:SAFE)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the fourth quarter of 2019. On the other hand, there were a total of 1 hedge funds with a bullish position in SAFE a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Safehold Inc. (NYSE:SAFE), which was worth $3.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $3 million worth of shares. PEAK6 Capital Management, Navellier & Associates, and ExodusPoint Capital 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 Navellier & Associates allocated the biggest weight to Safehold Inc. (NYSE:SAFE), around 0.32% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to SAFE.

Due to the fact that Safehold Inc. (NYSE:SAFE) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies that slashed their entire stakes last quarter. Intriguingly, David MacKnight’s One Fin Capital Management dropped the biggest position of all the hedgies monitored by Insider Monkey, totaling about $10.1 million in stock, and Matthew L Pinz’s Pinz Capital was right behind this move, as the fund sold off about $2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Safehold Inc. (NYSE:SAFE). These stocks are Huntsman Corporation (NYSE:HUN), Parsons Corporation (NYSE:PSN), Cemex SAB de CV (NYSE:CX), and L Brands Inc (NYSE:LB). All of these stocks’ market caps are closest to SAFE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUN 21 305231 -18
PSN 15 93372 5
CX 12 98642 -1
LB 39 919960 -7
Average 21.75 354301 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $354 million. That figure was $8 million in SAFE’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Cemex SAB de CV (NYSE:CX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Safehold Inc. (NYSE:SAFE) is even less popular than CX. Hedge funds dodged a bullet by taking a bearish stance towards SAFE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately SAFE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SAFE investors were disappointed as the stock returned -13.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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