A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on First Foundation Inc (NASDAQ:FFWM).
Is FFWM a good stock to buy now? First Foundation Inc (NASDAQ:FFWM) has seen an increase in hedge fund sentiment of late. First Foundation Inc (NASDAQ:FFWM) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FFWM isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s go over the fresh hedge fund action encompassing First Foundation Inc (NASDAQ:FFWM).
Do Hedge Funds Think FFWM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FFWM over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Endicott Management held the most valuable stake in First Foundation Inc (NASDAQ:FFWM), which was worth $14.9 million at the end of the third quarter. On the second spot was Azora Capital which amassed $13.7 million worth of shares. Elizabeth Park Capital Management, Arrowstreet Capital, and Royce & Associates 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 Endicott Management allocated the biggest weight to First Foundation Inc (NASDAQ:FFWM), around 20.58% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, designating 3.09 percent of its 13F equity portfolio to FFWM.
Consequently, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in First Foundation Inc (NASDAQ:FFWM). Marshall Wace LLP had $1.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager and Steve Cohen’s Point72 Asset Management.
Let’s now review hedge fund activity in other stocks similar to First Foundation Inc (NASDAQ:FFWM). These stocks are El Pollo LoCo Holdings Inc (NASDAQ:LOCO), Premier Financial Corp. (NASDAQ:PFC), America’s Car-Mart, Inc. (NASDAQ:CRMT), Cass Information Systems, Inc. (NASDAQ:CASS), Celldex Therapeutics, Inc. (NASDAQ:CLDX), Natus Medical Inc (NASDAQ:NTUS), and Unitil Corporation (NYSE:UTL). This group of stocks’ market caps resemble 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 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $51 million in FFWM’s case. Natus Medical Inc (NASDAQ:NTUS) is the most popular stock in this table. On the other hand Cass Information Systems, Inc. (NASDAQ:CASS) is the least popular one with only 5 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. Our overall hedge fund sentiment score for FFWM is 69.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on FFWM as the stock returned 44.2% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.