Do Hedge Funds Love The Howard Hughes Corporation (HHC)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards The Howard Hughes Corporation (NYSE:HHC) and determine whether hedge funds skillfully traded this stock.

Is The Howard Hughes Corporation (NYSE:HHC) the right investment to pursue these days? Investors who are in the know were becoming hopeful. The number of long hedge fund bets moved up by 4 lately. The Howard Hughes Corporation (NYSE:HHC) was in 28 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 33. Our calculations also showed that HHC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with HHC holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated financial vehicles of the past. While there are over 8000 funds in operation today, Our researchers choose to focus on the bigwigs of this group, approximately 850 funds. These money managers direct most of the hedge fund industry’s total asset base, and by monitoring their finest investments, Insider Monkey has deciphered various investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we’re going to view the key hedge fund action encompassing The Howard Hughes Corporation (NYSE:HHC).

How are hedge funds trading The Howard Hughes Corporation (NYSE:HHC)?

Heading into the third quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2020. On the other hand, there were a total of 26 hedge funds with a bullish position in HHC a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Pershing Square held the most valuable stake in The Howard Hughes Corporation (NYSE:HHC), which was worth $567.2 million at the end of the third quarter. On the second spot was Horizon Asset Management which amassed $56.4 million worth of shares. Cardinal Capital, MIC Capital Partners, and Renaissance Technologies 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 MIC Capital Partners allocated the biggest weight to The Howard Hughes Corporation (NYSE:HHC), around 10.46% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, dishing out 7.32 percent of its 13F equity portfolio to HHC.

As one would reasonably expect, key money managers have jumped into The Howard Hughes Corporation (NYSE:HHC) headfirst. Jet Capital Investors, managed by Matthew Mark, created the most valuable position in The Howard Hughes Corporation (NYSE:HHC). Jet Capital Investors had $11.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.9 million position during the quarter. The other funds with brand new HHC positions are Jonathan Berger’s Birch Grove Capital, Donald Sussman’s Paloma Partners, and Mark Coe’s Coe Capital Management.

Let’s check out hedge fund activity in other stocks similar to The Howard Hughes Corporation (NYSE:HHC). We will take a look at NuVasive, Inc. (NASDAQ:NUVA), Shift4 Payments, Inc. (NYSE:FOUR), Univar Solutions Inc (NYSE:UNVR), National Beverage Corp. (NASDAQ:FIZZ), Corporate Office Properties Trust (NYSE:OFC), Blackbaud, Inc. (NASDAQ:BLKB), and ALLETE Inc (NYSE:ALE). This group of stocks’ market valuations are closest to HHC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $766 million in HHC’s case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand Shift4 Payments, Inc. (NYSE:FOUR) is the least popular one with only 15 bullish hedge fund positions. The Howard Hughes Corporation (NYSE:HHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HHC is 70.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on HHC as the stock returned 11% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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