Hedge Funds Have Never Loved Frontline Ltd (FRO) More

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Frontline Ltd (NYSE:FRO).

Is Frontline Ltd (NYSE:FRO) an exceptional investment today? Prominent investors are betting on the stock. The number of bullish hedge fund positions went up by 7 lately. Our calculations also showed that FRO 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Crispin Odey of Odey Asset Management Group

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 these. 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 look at the fresh hedge fund action encompassing Frontline Ltd (NYSE:FRO).

How have hedgies been trading Frontline Ltd (NYSE:FRO)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in FRO over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FRO A Good Stock To Buy?

The largest stake in Frontline Ltd (NYSE:FRO) was held by Odey Asset Management Group, which reported holding $24.2 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $16.9 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to Frontline Ltd (NYSE:FRO), around 4.02% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, dishing out 1.84 percent of its 13F equity portfolio to FRO.

As aggregate interest increased, some big names have been driving this bullishness. No Street Capital, managed by Jeff Osher, initiated the most outsized position in Frontline Ltd (NYSE:FRO). No Street Capital had $9.1 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also initiated a $8.8 million position during the quarter. The following funds were also among the new FRO investors: Dmitry Balyasny’s Balyasny Asset Management, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, and Andrew Byington’s Appian Way Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Frontline Ltd (NYSE:FRO) but similarly valued. We will take a look at Alarm.com Holdings Inc (NASDAQ:ALRM), Alector, Inc. (NASDAQ:ALEC), EPR Properties (NYSE:EPR), and Wyndham Destinations, Inc. (NYSE:WYND). 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
ALRM 23 153195 -5
ALEC 15 416696 2
EPR 23 149422 -1
WYND 25 200324 -3
Average 21.5 229909 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $117 million in FRO’s case. Wyndham Destinations, Inc. (NYSE:WYND) is the most popular stock in this table. On the other hand Alector, Inc. (NASDAQ:ALEC) is the least popular one with only 15 bullish hedge fund positions. Frontline Ltd (NYSE:FRO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately FRO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FRO were disappointed as the stock returned -7.1% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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