Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to First Foundation Inc (NASDAQ:FFWM) changed recently.
First Foundation Inc (NASDAQ:FFWM) embarked on an uptrend in May and gained 19% since the beginning of July. At the same time it managed to attract some attention from the funds we track. The company was in 13 hedge funds’ portfolios at the end of September, while a quarter earlier, none of the funds we track held stakes in the company. At the end of this article we will also compare FFWM to other stocks, including Bazaarvoice Inc (NASDAQ:BV), Chase Corporation (NYSEMKT:CCF), and BlackRock Debt Strategies Fund, Inc. (NYSE:DSU) to get a better sense of its popularity.
To most market participants, hedge funds are viewed as underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds trading at present, We choose to focus on the aristocrats of this club, around 700 funds. These hedge fund managers orchestrate the lion’s share of the smart money’s total asset base, and by shadowing their finest picks, Insider Monkey has uncovered a number of investment strategies that have historically defeated the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, let’s check out the recent action surrounding First Foundation Inc (NASDAQ:FFWM).
How are hedge funds trading First Foundation Inc (NASDAQ:FFWM)?
When looking at the institutional investors followed by Insider Monkey, Robert I. Usdan and Wayne K. Goldstein’s Endicott Management has the most valuable position in First Foundation Inc (NASDAQ:FFWM), worth close to $11 million, accounting for 4.1% of its total 13F portfolio. On Endicott Management’s heels is Basswood Capital, led by Matthew Lindenbaum, holding an $7.4 million position; 0.4% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish include Emanuel J. Friedman’s EJF Capital, Anton Schutz’s Mendon Capital Advisors, and Paul Magidson, Jonathan Cohen and Ostrom Enders’s Castine Capital Management.
Let’s now review hedge fund activity in other stocks similar to First Foundation Inc (NASDAQ:FFWM). These stocks are Bazaarvoice Inc (NASDAQ:BV), Chase Corporation (NYSEMKT:CCF), BlackRock Debt Strategies Fund, Inc. (NYSE:DSU), and TRC Companies, Inc. (NYSE:TRR). This group of stocks’ market valuations are closest to FFWM’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $56 million. That figure was $45 million in FFWM’s case. Bazaarvoice Inc (NASDAQ:BV) is the most popular stock in this table. On the other hand BlackRock Debt Strategies Fund, Inc. (NYSE:DSU) 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. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BV might be a better candidate to consider a long position.