At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Fang Holdings Limited (NYSE:SFUN).
Fang Holdings Limited (NYSE:SFUN) was in 4 hedge funds’ portfolios at the end of March. SFUN investors should be aware of a decrease in enthusiasm from smart money recently. There were 6 hedge funds in our database with SFUN holdings at the end of the previous quarter. Our calculations also showed that SFUN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lei Zhang of Hillhouse Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the key hedge fund action encompassing Fang Holdings Limited (NYSE:SFUN).
What does smart money think about Fang Holdings Limited (NYSE:SFUN)?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the fourth quarter of 2019. On the other hand, there were a total of 8 hedge funds with a bullish position in SFUN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Lei Zhang’s Hillhouse Capital Management has the biggest position in Fang Holdings Limited (NYSE:SFUN), worth close to $0.4 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass D. E. Shaw’s D E Shaw, Donald Sussman’s Paloma Partners and . In terms of the portfolio weights assigned to each position Hillhouse Capital Management allocated the biggest weight to Fang Holdings Limited (NYSE:SFUN), around 0.01% of its 13F portfolio. Paloma Partners is also relatively very bullish on the stock, designating 0.0009 percent of its 13F equity portfolio to SFUN.
Seeing as Fang Holdings Limited (NYSE:SFUN) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedgies who sold off their entire stakes heading into Q4. At the top of the heap, Renaissance Technologies sold off the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $0.2 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $0.1 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Fang Holdings Limited (NYSE:SFUN) but similarly valued. These stocks are Evelo Biosciences, Inc. (NASDAQ:EVLO), County Bancorp, Inc. (NASDAQ:ICBK), Farmer Brothers Co. (NASDAQ:FARM), and Affimed NV (NASDAQ:AFMD). This group of stocks’ market valuations are closest to SFUN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVLO | 3 | 185 | 0 |
| ICBK | 5 | 8535 | -2 |
| FARM | 16 | 39910 | 4 |
| AFMD | 16 | 21432 | 3 |
| Average | 10 | 17516 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $1 million in SFUN’s case. Farmer Brothers Co. (NASDAQ:FARM) is the most popular stock in this table. On the other hand Evelo Biosciences, Inc. (NASDAQ:EVLO) is the least popular one with only 3 bullish hedge fund positions. Fang Holdings Limited (NYSE:SFUN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately SFUN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SFUN investors were disappointed as the stock returned -20.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Fang Holdings Limited (NYSE:SFUN)
Follow Fang Holdings Limited (NYSE:SFUN)
Disclosure: None. This article was originally published at Insider Monkey.
