Here is What Hedge Funds Think About First Hawaiian, Inc. (FHB)

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about First Hawaiian, Inc. (NASDAQ:FHB) in this article.

Is First Hawaiian, Inc. (NASDAQ:FHB) undervalued? Prominent investors are becoming less hopeful. The number of long hedge fund bets fell by 7 recently. Our calculations also showed that fhb isn’t among the 30 most popular stocks among hedge funds.

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 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Clint Carlson, Carlson Capital

Let’s take a glance at the fresh hedge fund action regarding First Hawaiian, Inc. (NASDAQ:FHB).

Hedge fund activity in First Hawaiian, Inc. (NASDAQ:FHB)

Heading into the first quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in FHB a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds With FHB Positions

The largest stake in First Hawaiian, Inc. (NASDAQ:FHB) was held by Citadel Investment Group, which reported holding $80.5 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $38.3 million position. Other investors bullish on the company included Carlson Capital, Millennium Management, and D E Shaw.

Seeing as First Hawaiian, Inc. (NASDAQ:FHB) has faced falling interest from hedge fund managers, we can see that there were a few fund managers who were dropping their full holdings by the end of the third quarter. Interestingly, Scott Bessent’s Key Square Capital Management dumped the largest investment of the 700 funds tracked by Insider Monkey, worth an estimated $40.7 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $22.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 7 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as First Hawaiian, Inc. (NASDAQ:FHB) but similarly valued. These stocks are Investors Bancorp, Inc. (NASDAQ:ISBC), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), Belmond Ltd (NYSE:BEL), and Versum Materials, Inc. (NYSE:VSM). All of these stocks’ market caps are closest to FHB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ISBC 27 650714 -6
BJ 16 233292 -16
BEL 20 334659 4
VSM 29 491674 8
Average 23 427585 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $428 million. That figure was $277 million in FHB’s case. Versum Materials, Inc. (NYSE:VSM) is the most popular stock in this table. On the other hand BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is the least popular one with only 16 bullish hedge fund positions. First Hawaiian, Inc. (NASDAQ:FHB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on FHB, though not to the same extent, as the stock returned 19.7% and outperformed the market as well.

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