Is First Hawaiian, Inc. (FHB) Going to Burn These Hedge Funds?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding First Hawaiian, Inc. (NASDAQ:FHB).

First Hawaiian, Inc. (NASDAQ:FHB) has seen a decrease in enthusiasm from smart money lately. First Hawaiian, Inc. (NASDAQ:FHB) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. There were 19 hedge funds in our database with FHB holdings at the end of March. Our calculations also showed that FHB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a gander at the latest hedge fund action encompassing First Hawaiian, Inc. (NASDAQ:FHB).

Do Hedge Funds Think FHB Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -47% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in FHB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Yacktman Asset Management held the most valuable stake in First Hawaiian, Inc. (NASDAQ:FHB), which was worth $78.9 million at the end of the second quarter. On the second spot was Royce & Associates which amassed $33.5 million worth of shares. GLG Partners, Wallace R. Weitz & Co., and Millennium Management 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 Yacktman Asset Management allocated the biggest weight to First Hawaiian, Inc. (NASDAQ:FHB), around 0.77% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.23 percent of its 13F equity portfolio to FHB.

Seeing as First Hawaiian, Inc. (NASDAQ:FHB) has faced a decline in interest from hedge fund managers, logic holds that there is a sect of money managers that slashed their entire stakes last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group cut the largest position of the 750 funds tracked by Insider Monkey, comprising about $9.3 million in stock, and Daniel Johnson’s Gillson Capital was right behind this move, as the fund dumped about $6.4 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 9 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to First Hawaiian, Inc. (NASDAQ:FHB). These stocks are Allogene Therapeutics, Inc. (NASDAQ:ALLO), Sana Biotechnology, Inc. (NASDAQ:SANA), Covetrus, Inc. (NASDAQ:CVET), ServisFirst Bancshares, Inc. (NYSE:SFBS), Equitrans Midstream Corporation (NYSE:ETRN), Broadstone Net Lease, Inc. (NYSE:BNL), and Inc. (NASDAQ:STMP). This group of stocks’ market caps resemble FHB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALLO 26 240779 7
SANA 10 76873 -5
CVET 18 144353 1
SFBS 10 10152 1
ETRN 27 289754 -1
BNL 12 40345 3
STMP 27 648480 -5
Average 18.6 207248 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $145 million in FHB’s case. Equitrans Midstream Corporation (NYSE:ETRN) is the most popular stock in this table. On the other hand Sana Biotechnology, Inc. (NASDAQ:SANA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks First Hawaiian, Inc. (NASDAQ:FHB) is even less popular than SANA. Our overall hedge fund sentiment score for FHB is 6.7. 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. Hedge funds clearly dropped the ball on FHB as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. A small number of hedge funds were also right about betting on FHB as the stock returned 6% since Q2 (through September 27th) and outperformed the market by an even larger margin.

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