The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Front Yard Residential Corporation (NYSE:RESI) based on those filings.
Is RESI a good stock to buy now? Money managers were getting less optimistic. The number of long hedge fund positions were cut by 5 lately. Front Yard Residential Corporation (NYSE:RESI) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that RESI 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). There were 25 hedge funds in our database with RESI positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are dozens of signals shareholders can use to value their stock investments. Some of the most useful signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the S&P 500 by a very impressive amount (see the details here).
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. Now let’s take a gander at the key hedge fund action encompassing Front Yard Residential Corporation (NYSE:RESI).
Do Hedge Funds Think RESI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in RESI over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pentwater Capital Management was the largest shareholder of Front Yard Residential Corporation (NYSE:RESI), with a stake worth $12.9 million reported as of the end of September. Trailing Pentwater Capital Management was Millennium Management, which amassed a stake valued at $12.1 million. Balyasny Asset Management, Water Island Capital, and D E Shaw 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 Voss Capital allocated the biggest weight to Front Yard Residential Corporation (NYSE:RESI), around 1.12% of its 13F portfolio. Almitas Capital is also relatively very bullish on the stock, dishing out 0.83 percent of its 13F equity portfolio to RESI.
Seeing as Front Yard Residential Corporation (NYSE:RESI) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds that slashed their entire stakes in the third quarter. It’s worth mentioning that George McCabe’s Portolan Capital Management dumped the biggest position of all the hedgies tracked by Insider Monkey, worth close to $3.7 million in stock, and C. Jonathan Gattman’s Cloverdale Capital Management was right behind this move, as the fund said goodbye to about $3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Front Yard Residential Corporation (NYSE:RESI). These stocks are Flexion Therapeutics Inc (NASDAQ:FLXN), Globalstar, Inc. (NYSE:GSAT), FuelCell Energy, Inc. (NASDAQ:FCEL), Maxeon Solar Technologies, Ltd. (NASDAQ:MAXN), CarParts.com, Inc. (NASDAQ:PRTS), Great Southern Bancorp, Inc. (NASDAQ:GSBC), and NGL Energy Partners LP (NYSE:NGL). This group of stocks’ market valuations are closest to RESI’s market valuation.
|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 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $57 million in RESI’s case. CarParts.com, Inc. (NASDAQ:PRTS) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 2 bullish hedge fund positions. Front Yard Residential Corporation (NYSE:RESI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RESI is 69. 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 RESI as the stock returned 85.1% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.