Hedge Funds Aren’t Crazy About frontdoor, inc. (FTDR) Anymore

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about frontdoor, inc. (NASDAQ:FTDR).

Is frontdoor, inc. (NASDAQ:FTDR) a buy, sell, or hold? Investors who are in the know were turning less bullish. The number of long hedge fund bets were cut by 1 lately. frontdoor, inc. (NASDAQ:FTDR) was in 36 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 41. Our calculations also showed that FTDR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a multitude of formulas shareholders employ to evaluate publicly traded companies. A couple of the less utilized formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outperform the S&P 500 by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Gavin Saitowitz of Prelude Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a gander at the new hedge fund action regarding frontdoor, inc. (NASDAQ:FTDR).

Do Hedge Funds Think FTDR Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the fourth quarter of 2020. On the other hand, there were a total of 33 hedge funds with a bullish position in FTDR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, David Cohen and Harold Levy’s Iridian Asset Management has the most valuable position in frontdoor, inc. (NASDAQ:FTDR), worth close to $131.3 million, comprising 2.2% of its total 13F portfolio. On Iridian Asset Management’s heels is Rima Senvest Management, managed by Richard Mashaal, which holds a $102.1 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Renaissance Technologies, David Brown’s Hawk Ridge Management and Lauren Taylor Wolfe’s Impactive Capital. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to frontdoor, inc. (NASDAQ:FTDR), around 11.71% of its 13F portfolio. Engle Capital is also relatively very bullish on the stock, designating 8.41 percent of its 13F equity portfolio to FTDR.

Judging by the fact that frontdoor, inc. (NASDAQ:FTDR) has witnessed declining sentiment from the smart money, it’s easy to see that there is a sect of hedgies that decided to sell off their full holdings heading into Q2. At the top of the heap, Jeffrey Gates’s Gates Capital Management cut the biggest investment of the 750 funds watched by Insider Monkey, worth an estimated $70.4 million in stock, and Steven Boyd’s Armistice Capital was right behind this move, as the fund said goodbye to about $32.9 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds heading into Q2.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as frontdoor, inc. (NASDAQ:FTDR) but similarly valued. These stocks are HUYA Inc. (NYSE:HUYA), China Biologic Products Holdings Inc (NASDAQ:CBPO), Houlihan Lokey Inc (NYSE:HLI), Leslie’s, Inc. (NASDAQ:LESL), Kornit Digital Ltd. (NASDAQ:KRNT), National Beverage Corp. (NASDAQ:FIZZ), and Blackstone Mortgage Trust Inc (NYSE:BXMT). This group of stocks’ market caps match FTDR’s market cap.

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As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $763 million in FTDR’s case. Leslie’s, Inc. (NASDAQ:LESL) is the most popular stock in this table. On the other hand HUYA Inc. (NYSE:HUYA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks frontdoor, inc. (NASDAQ:FTDR) is more popular among hedge funds. Our overall hedge fund sentiment score for FTDR is 80.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately FTDR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FTDR were disappointed as the stock returned -6.7% since the end of the first quarter (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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