Hedge Funds Hate These 10 Large-Caps, Part 2

As we discussed in the first part of this article, by the end of 2007 hedge funds held nearly 10% of the outstanding shares of an average company listed on U.S stock exchanges. Companies having huge backing from the hedge fund industry in terms of share ownership concentration are commonly referred to as ‘hedge fund hotels’ and in times of crises they can face sharp declines in share price as these money managers check out of their “hotels”. Nonetheless, these stocks make for attractive investments, as they represent companies that multiple smart money investors are extremely bullish on. Let’s now take a look at the next five stocks on our list of ten companies that haven’t gained any kind of traction among hedgies and therefore may not represent very good investments right now. Note that foreign companies such as those listed as (ADR) or (USA) on U.S exchanges have not been considered for the purposes of this article, owing to their general lack of popularity among hedgies.

General Growth Properties Inc (NYSE:GGP)

 – Concentration of Ownership (as of September 30): 1.2%

 – Investors with Long Positions (as of September 30): 27

 – Aggregate Value of Investors’ Holdings (as of September 30): $271.83 Million

While the total number of money managers backing General Growth Properties Inc (NYSE:GGP) increased by five during the July-to-September period, the aggregate value of these holdings slid by $45.26 million. Since the stock rose by 1.3% during this period, it can be concluded that hedgies were generally keen on reducing their exposure to the retail REIT, which offers a dividend yield of 2.93%. Although the company managed to marginally beat bottom line estimates in its financial results for the third quarter, it missed top line expectations. Well-known fund Millennium Management, led by Israel Englander, owns about 3.18 million shares of General Growth Properties Inc (NYSE:GGP).

Synchrony Financial (NYSE:SYF)

 – Concentration of Ownership (as of September 30): 1.1%

 – Investors with Long Positions (as of September 30): 21

 – Aggregate Value of Investors’ Holdings (as of September 30): $291.57 Million

Although the hedge fund concentration in the $25.89 billion consumer financial services company remains very small, hedge funds were fairly bullish towards Synchrony during the third quarter. The total number of hedge funds with ownership of the company increased by eight, while the aggregate value of their holdings appreciated by more than 125%. The investor exuberence came despite a 5.8% fall in Synchrony Financial (NYSE:SYF)’s stock price during this period. So far this year, the stock is trading nearly sideways. Sterne Agee CRT recently upgraded the stock to ‘Buy’ from ‘Neutral’, and has a price target of $38 on it, which suggests upside of about 26%. Matthew Halbower‘s Pentwater Capital Management owns about 3.05 million shares of Synchrony Financial (NYSE:SYF).

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds has returned 102% since the end of August 2012, beat the S&P 500 Index by 53 percentage points (see the details here).

Las Vegas Sands Corp. (NYSE:LVS)

 – Concentration of Ownership (as of September 30): 0.9%

 – Investors with Long Positions (as of September 30): 29

 – Aggregate Value of Investors’ Holdings (as of September 30): $260.58 Million

While the total number of hedge funds with exposure to Las Vegas Sands dropped by ten during the July-to-September period, the corresponding drop in the value of their aggregate investments was $4.86 million. Las Vegas Sands Corp. (NYSE:LVS)’s stock has tanked by over 29% this year, while the casino industry has posted an average dip of 4.6% during this time. The major problem for the industry has been the Chinese travel and currency restrictions that have been in place since June 2014, which has significantly hit revenue from the Asian gambling mecca, Macau. However, casino operators have now become more efficient and it seems that the impact of Macau has bottomed out. Horizon Asset Management, which is led by Murray Stahl, holds about 638,500 shares of Las Vegas Sands Corp. (NYSE:LVS).

Thomson Reuters Corp (NYSE:TRI)

 – Concentration of Ownership (as of September 30): 0.8%

 – Investors with Long Positions (as of September 30): 12

 – Aggregate Value of Investors’ Holdings (as of September 30): $241.72 Million

During the third quarter, even more hedge funds, among the more than 700 that we track, wiped their hands of Thomson Reuters, as the total number holding the company in their portfolios dropped by five, though the value of their aggregate investments rose by 18%. Thomson Reuters Corp (NYSE:TRI) has an aggressive share repurchase program and delivered solid financial results for the third quarter, though there was a 4% drop in its top line quarter-over-quarter, which was primarily due to currency fluctuations. Daniel Bubis‘ Tetrem Capital Management is the largest stockholder of Thomson Reuters Corp (NYSE:TRI) within our database, as it hiked its stake in the company to 1.88 million shares in the third trimester.

Southern Copper Corp (NYSE:SCCO)

 – Concentration of Ownership (as of September 30): 0.4%

 – Investors with Long Positions (as of September 30): 10

 – Aggregate Value of Investors’ Holdings (as of September 30): $92.76 Million

During the July-to-September period, Southern Copper’s shares fell by about 7%. The aggregate value of hedge funds’ holdings in the company, however, more than doubled during this period, even as the total number of firms with investments in the company remained the same. Despite the downtrend in copper prices, Southern Copper Corp (NYSE:SCCO) along with other major producers such as BHP Billiton Limited (ADR) (NYSE:BHP) and Rio Tinto plc (ADR) (NYSE:RIO), is going ahead with its expansion plans. It will be a good strategy if copper prices have bottomed out, but that remains to be seen. Steve Cohen’s family office Point72 Asset Management holds 1.77 million shares of Southern Copper Corp (NYSE:SCCO).

Disclosure: None