How do we determine whether Frontline Ltd (NYSE:FRO) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Frontline Ltd (NYSE:FRO) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Zai Lab Limited (NASDAQ:ZLAB), NIC Inc. (NASDAQ:EGOV), and Enova International Inc (NYSE:ENVA) to gather more data points.
According to most traders, hedge funds are perceived as slow, old financial tools of years past. While there are greater than 8,000 funds with their doors open at the moment, Our researchers choose to focus on the elite of this club, about 700 funds. These hedge fund managers preside over the lion’s share of the hedge fund industry’s total capital, and by watching their first-class equity investments, Insider Monkey has spotted several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by 6 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let’s take a gander at the recent hedge fund action surrounding Frontline Ltd (NYSE:FRO).
How are hedge funds trading Frontline Ltd (NYSE:FRO)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, no change from the second quarter of 2018. On the other hand, there were a total of 9 hedge funds with a bullish position in FRO at the beginning of this year. 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, Renaissance Technologies was the largest shareholder of Frontline Ltd (NYSE:FRO), with a stake worth $7.2 million reported as of the end of September. Trailing Renaissance Technologies was Odey Asset Management Group, which amassed a stake valued at $0.8 million. Citadel Investment Group, GLG Partners, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Since Frontline Ltd (NYSE:FRO) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who were dropping their full holdings in the third quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $4.5 million in stock. Simon Sadler’s fund, Segantii Capital, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total 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 Frontline Ltd (NYSE:FRO) but similarly valued. We will take a look at Zai Lab Limited (NASDAQ:ZLAB), NIC Inc. (NASDAQ:EGOV), Enova International Inc (NYSE:ENVA), and Kforce Inc. (NASDAQ:KFRC). This group of stocks’ market caps match FRO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZLAB | 20 | 135170 | 8 |
| EGOV | 18 | 69966 | 3 |
| ENVA | 21 | 187946 | -1 |
| KFRC | 20 | 78246 | 4 |
| Average | 19.75 | 117832 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $9 million in FRO’s case. Enova International Inc (NYSE:ENVA) is the most popular stock in this table. On the other hand NIC Inc. (NASDAQ:EGOV) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Frontline Ltd (NYSE:FRO) is even less popular than EGOV. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
