Do Hedge Funds Love Frontline Ltd (FRO)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Frontline Ltd (NYSE:FRO).

Hedge fund interest in Frontline Ltd (NYSE:FRO) shares was flat at the end of last quarter. This is usually a negative indicator. What might seem a bit surprising was the stock performance of Frontline Ltd (NYSE:FRO), which grew 10.25% during the quarter. Such contradictory sentiments prompted us to find out more about the hedgies that held positions in Frontline Ltd (NYSE:FRO), at the end of the last quarter.

For an in-depth understanding of the hedge fund sentiment surrounding Frontline Ltd (NYSE:FRO), we will compare it to other stocks, including The Marcus Corporation (NYSE:MCS), Haverty Furniture Companies, Inc. (NYSE:HVT), and Unifi, Inc. (NYSE:UFI) to get a better sense of its popularity.

If you’d ask most investors, hedge funds are assumed to be underperforming, outdated investment tools of years past. While there are more than an 8000 funds trading at the moment, Our researchers look at the top tier of this group, around 700 funds. These money managers direct most of the smart money’s total asset base, and by keeping track of their matchless investments, Insider Monkey has come up with many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s take a look at the recent action surrounding Frontline Ltd (NYSE:FRO).

How are hedge funds trading Frontline Ltd (NYSE:FRO)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund and institutional investor database, Point72 Asset Management, managed by Steve Cohen, holds the number one position in Frontline Ltd (NYSE:FRO). Point72 Asset Management has a $3.6 million position in the stock, comprising less than 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $3 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Crispin Odey’s Odey Asset Management Group, and GLG Partners.

Because Frontline Ltd (NYSE:FRO) has faced a bearish sentiment from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their positions entirely in the third quarter. At the top of the heap, Glenn Russell Dubin’s Highbridge Capital Management dumped the largest stake of the 700 funds tracked by Insider Monkey, totaling an estimated $0.5 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dropped its stock, about $0.5 million worth of shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Frontline Ltd (NYSE:FRO) but similarly valued. These stocks are The Marcus Corporation (NYSE:MCS), Haverty Furniture Companies, Inc. (NYSE:HVT), Unifi, Inc. (NYSE:UFI), and Blackrock Muni Intermediate Drtn Fnd Inc (NYSE:MUI). This group of stocks’ market values resemble Frontline Ltd (NYSE:FRO)’s market value.

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 $46 million. That figure was $16 million in Frontline Ltd (NYSE:FRO)’s case. The Marcus Corporation (NYSE:MCS) is the most popular stock in this table. On the other hand, Blackrock Muni Intermediate Drtn Fnd Inc (NYSE:MUI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Frontline Ltd (NYSE:FRO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.