Hedge Funds Are Betting On PHH Corporation (PHH)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards PHH Corporation (NYSE:PHH).

PHH Corporation (NYSE:PHH) was in 22 hedge funds’ portfolios at the end of the third quarter of 2015. PHH has experienced an increase in support from the world’s most elite money managers of late. There were 15 hedge funds in our database with PHH positions at the end of the previous quarter. 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 SkyWest, Inc. (NASDAQ:SKYW), Badger Meter, Inc. (NYSE:BMI), and Irsa Inversiones y Rprsntcins SA (ADR) (NYSE:IRS) to gather more data points.

According to most stock holders, hedge funds are assumed to be unimportant, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers look at the upper echelon of this club, about 700 funds. Most estimates calculate that this group of people administer the lion’s share of all hedge funds’ total asset base, and by following their finest investments, Insider Monkey has spotted many investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to take a look at the key action encompassing PHH Corporation (NYSE:PHH).

How have hedgies been trading PHH Corporation (NYSE:PHH)?

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 47% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Glenview Capital, managed by Larry Robbins, holds the most valuable position in PHH Corporation (NYSE:PHH). Glenview Capital has a $84.2 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Samlyn Capital, managed by Robert Pohly, which holds a $42.1 million position; 0.8% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass Emanuel J. Friedman’s EJF Capital, Ken Griffin’s Citadel Investment Group and Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital.

As industrywide interest jumped, some big names have been driving this bullishness. Samlyn Capital, managed by Robert Pohly, assembled the most valuable position in PHH Corporation (NYSE:PHH). Samlyn Capital had $42.1 million invested in the company at the end of the quarter. Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital also initiated a $19.2 million position during the quarter. The other funds with new positions in the stock are Gunnar Overstrom’s Three Corner Global Investors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Richard Mashaal’s Rima Senvest Management.

Let’s also examine hedge fund activity in other stocks similar to PHH Corporation (NYSE:PHH). These stocks are SkyWest, Inc. (NASDAQ:SKYW), Badger Meter, Inc. (NYSE:BMI), Irsa Inversiones y Rprsntcins SA (ADR) (NYSE:IRS), and Ocwen Financial Corporation (NYSE:OCN). This group of stocks’ market values are closest to PHH’s market value.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $275 million in PHH’s case. Ocwen Financial Corporation (NYSE:OCN) is the most popular stock in this table. On the other hand Badger Meter, Inc. (NYSE:BMI) is the least popular one with only 5 bullish hedge fund positions. PHH Corporation (NYSE:PHH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OCN might be a better candidate to consider a long position.