Here is What Hedge Funds Think About The Howard Hughes Corporation (HHC)

Does The Howard Hughes Corporation (NYSE:HHC) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

The Howard Hughes Corporation (NYSE:HHC) was in 25 hedge funds’ portfolios at the end of the third quarter of 2019. HHC investors should be aware of a decrease in hedge fund interest lately. There were 26 hedge funds in our database with HHC holdings at the end of the previous quarter. Our calculations also showed that HHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action surrounding The Howard Hughes Corporation (NYSE:HHC).

How have hedgies been trading The Howard Hughes Corporation (NYSE:HHC)?

At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in HHC 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.

No of Hedge Funds with HHC Positions

More specifically, Horizon Asset Management was the largest shareholder of The Howard Hughes Corporation (NYSE:HHC), with a stake worth $203.6 million reported as of the end of September. Trailing Horizon Asset Management was Pershing Square, which amassed a stake valued at $154.8 million. Pentwater Capital Management, Renaissance Technologies, and Cardinal 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 Horizon Asset Management allocated the biggest weight to The Howard Hughes Corporation (NYSE:HHC), around 6.13% of its portfolio. Swift Run Capital Management is also relatively very bullish on the stock, setting aside 5.03 percent of its 13F equity portfolio to HHC.

Judging by the fact that The Howard Hughes Corporation (NYSE:HHC) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies who were dropping their positions entirely last quarter. Interestingly, Jeffrey Furber’s AEW Capital Management sold off the largest investment of all the hedgies followed by Insider Monkey, valued at close to $25.3 million in stock. David M. Knott’s fund, Dorset Management, also dumped its stock, about $1.6 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to The Howard Hughes Corporation (NYSE:HHC). These stocks are IAA, Inc. (NYSE:IAA), KT Corporation (NYSE:KT), Cullen/Frost Bankers, Inc. (NYSE:CFR), and National Instruments Corporation (NASDAQ:NATI). This group of stocks’ market caps resemble HHC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IAA 31 758086 -11
KT 18 267914 -1
CFR 20 116202 2
NATI 22 310660 0
Average 22.75 363216 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $527 million in HHC’s case. IAA, Inc. (NYSE:IAA) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 18 bullish hedge fund positions. The Howard Hughes Corporation (NYSE:HHC) 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 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 HHC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HHC were disappointed as the stock returned -14.8% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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