At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards frontdoor, inc. (NASDAQ:FTDR).
frontdoor, inc. (NASDAQ:FTDR) was in 33 hedge funds’ portfolios at the end of the first quarter of 2020. FTDR has experienced a decrease in hedge fund interest recently. There were 37 hedge funds in our database with FTDR holdings at the end of the previous quarter. Our calculations also showed that FTDR 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.
If you’d ask most traders, hedge funds are assumed to be underperforming, old investment tools of yesteryear. While there are more than 8000 funds in operation today, We choose to focus on the top tier of this club, around 850 funds. Most estimates calculate that this group of people oversee the lion’s share of the smart money’s total capital, and by tracking their highest performing equity investments, Insider Monkey has identified a few investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 trades like this one. 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. Keeping this in mind we’re going to take a glance at the recent hedge fund action encompassing frontdoor, inc. (NASDAQ:FTDR).
What have hedge funds been doing with frontdoor, inc. (NASDAQ:FTDR)?
At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FTDR over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Iridian Asset Management was the largest shareholder of frontdoor, inc. (NASDAQ:FTDR), with a stake worth $77.2 million reported as of the end of September. Trailing Iridian Asset Management was Renaissance Technologies, which amassed a stake valued at $75.4 million. Maverick Capital, Rima Senvest Management, and Hawk Ridge 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 StackLine Partners allocated the biggest weight to frontdoor, inc. (NASDAQ:FTDR), around 15.01% of its 13F portfolio. Billings Capital Management is also relatively very bullish on the stock, designating 14.09 percent of its 13F equity portfolio to FTDR.
Because frontdoor, inc. (NASDAQ:FTDR) has experienced declining sentiment from hedge fund managers, logic holds that there were a few fund managers that slashed their full holdings last quarter. Intriguingly, Richard Chilton’s Chilton Investment Company said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $51.4 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $13.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as frontdoor, inc. (NASDAQ:FTDR) but similarly valued. These stocks are Polaris Inc. (NYSE:PII), Selective Insurance Group, Inc. (NASDAQ:SIGI), BlackLine, Inc. (NASDAQ:BL), and Texas Pacific Land Trust (NYSE:TPL). This group of stocks’ market values are closest to FTDR’s market value.
|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 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $553 million in FTDR’s case. Polaris Inc. (NYSE:PII) is the most popular stock in this table. On the other hand Texas Pacific Land Trust (NYSE:TPL) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks frontdoor, inc. (NASDAQ:FTDR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on FTDR as the stock returned 31.3% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.