In this article we will take a look at whether hedge funds think Farmland Partners Inc (NYSE:FPI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is FPI a good stock to buy now? Farmland Partners Inc (NYSE:FPI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that FPI 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). At the end of this article we will also compare FPI to other stocks including Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST), Aduro BioTech Inc (NASDAQ:ADRO), and Uranium Energy Corp. (NYSE:UEC) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 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.
Keeping this in mind let’s take a glance at the recent hedge fund action regarding Farmland Partners Inc (NYSE:FPI).
What have hedge funds been doing with Farmland Partners Inc (NYSE:FPI)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. By comparison, 9 hedge funds held shares or bullish call options in FPI 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.
More specifically, D E Shaw was the largest shareholder of Farmland Partners Inc (NYSE:FPI), with a stake worth $1.5 million reported as of the end of September. Trailing D E Shaw was Marshall Wace LLP, which amassed a stake valued at $0.9 million. Renaissance Technologies, Arrowstreet Capital, and Forward 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 Forward Management allocated the biggest weight to Farmland Partners Inc (NYSE:FPI), around 0.1% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to FPI.
Judging by the fact that Farmland Partners Inc (NYSE:FPI) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few fund managers that slashed their full holdings last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $0.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Farmland Partners Inc (NYSE:FPI) but similarly valued. We will take a look at Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST), Aduro BioTech Inc (NASDAQ:ADRO), Uranium Energy Corp. (NYSE:UEC), MiX Telematics Limited (NYSE:MIXT), Otonomy Inc (NASDAQ:OTIC), Heat Biologics, Inc. (NASDAQ:HTBX), and Vuzix Corporation (NASDAQ:VUZI). All of these stocks’ market caps match FPI’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 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $5 million in FPI’s case. Otonomy Inc (NASDAQ:OTIC) is the most popular stock in this table. On the other hand Heat Biologics, Inc. (NASDAQ:HTBX) is the least popular one with only 1 bullish hedge fund positions. Farmland Partners Inc (NYSE:FPI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FPI is 52.3. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on FPI as the stock returned 19.7% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.