Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Five Point Holdings, LLC (NYSE:FPH) in this article.
Five Point Holdings, LLC (NYSE:FPH) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare FPH to other stocks including Oasis Petroleum Inc. (NYSE:OAS), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), and Career Education Corp. (NASDAQ:CECO) to get a better sense of its popularity.
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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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action surrounding Five Point Holdings, LLC (NYSE:FPH).
How have hedgies been trading Five Point Holdings, LLC (NYSE:FPH)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in FPH a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Five Point Holdings, LLC (NYSE:FPH) was held by Third Avenue Management, which reported holding $82.7 million worth of stock at the end of September. It was followed by Long Pond Capital with a $48.5 million position. Other investors bullish on the company included Anchorage Advisors, Luxor Capital Group, and Glendon Capital Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Five Point Holdings, LLC (NYSE:FPH), around 7.46% of its 13F portfolio. Glendon Capital Management is also relatively very bullish on the stock, earmarking 3.54 percent of its 13F equity portfolio to FPH.
Due to the fact that Five Point Holdings, LLC (NYSE:FPH) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their entire stakes by the end of the third quarter. Interestingly, Thomas Ellis and Todd Hammer’s North Run Capital cut the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling close to $1.5 million in stock. John A. Levin’s fund, Levin Capital Strategies, also dumped its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Five Point Holdings, LLC (NYSE:FPH). We will take a look at Oasis Petroleum Inc. (NYSE:OAS), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), Career Education Corp. (NASDAQ:CECO), and Tortoise Energy Infrastructure Corporation (NYSE:TYG). This group of stocks’ market valuations resemble FPH’s market valuation.
|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 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $256 million in FPH’s case. Career Education Corp. (NASDAQ:CECO) is the most popular stock in this table. On the other hand Tortoise Energy Infrastructure Corporation (NYSE:TYG) is the least popular one with only 1 bullish hedge fund positions. Five Point Holdings, LLC (NYSE:FPH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FPH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FPH investors were disappointed as the stock returned -6.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.