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. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31 holdings, data that is available nowhere else. Should you consider First Foundation Inc (NASDAQ:FFWM) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
First Foundation Inc (NASDAQ:FFWM) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Niu Technologies (NASDAQ:NIU), Fang Holdings Limited (NYSE:SFUN), and Primo Water Corporation (NASDAQ:PRMW) to gather more data points.
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 40 percentage points since May 2014 through May 30, 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.
We’re going to check out the new hedge fund action encompassing First Foundation Inc (NASDAQ:FFWM).
How have hedgies been trading First Foundation Inc (NASDAQ:FFWM)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in FFWM a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in First Foundation Inc (NASDAQ:FFWM) was held by Mendon Capital Advisors, which reported holding $17.3 million worth of stock at the end of March. It was followed by Endicott Management with a $15.5 million position. Other investors bullish on the company included Basswood Capital, Azora Capital, and Millennium Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Blue Mountain Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).
Let’s check out hedge fund activity in other stocks similar to First Foundation Inc (NASDAQ:FFWM). These stocks are Niu Technologies (NASDAQ:NIU), Fang Holdings Limited (NYSE:SFUN), Primo Water Corporation (NASDAQ:PRMW), and Cohu, Inc. (NASDAQ:COHU). This group of stocks’ market caps are similar to FFWM’s market cap.
|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 9 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $77 million in FFWM’s case. Primo Water Corporation (NASDAQ:PRMW) is the most popular stock in this table. On the other hand Niu Technologies (NASDAQ:NIU) is the least popular one with only 2 bullish hedge fund positions. First Foundation Inc (NASDAQ:FFWM) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately FFWM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FFWM were disappointed as the stock returned -0.4% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.