Hedge Funds Watching First Hawaiian, Inc. (FHB) From Afar

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of First Hawaiian, Inc. (NASDAQ:FHB) based on that data and determine whether they were really smart about the stock.

First Hawaiian, Inc. (NASDAQ:FHB) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. Our calculations also showed that FHB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare FHB to other stocks including CNO Financial Group Inc (NYSE:CNO), Acadia Healthcare Company Inc (NASDAQ:ACHC), and FormFactor, Inc. (NASDAQ:FORM) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a gander at the fresh hedge fund action surrounding First Hawaiian, Inc. (NASDAQ:FHB).

What does smart money think about First Hawaiian, Inc. (NASDAQ:FHB)?

At the end of June, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FHB over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Donald Yacktman’s Yacktman Asset Management has the most valuable position in First Hawaiian, Inc. (NASDAQ:FHB), worth close to $48.8 million, accounting for 0.8% of its total 13F portfolio. Coming in second is Renaissance Technologies, holding a $23 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish include D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Yacktman Asset Management allocated the biggest weight to First Hawaiian, Inc. (NASDAQ:FHB), around 0.78% of its 13F portfolio. Wallace R. Weitz & Co. is also relatively very bullish on the stock, earmarking 0.26 percent of its 13F equity portfolio to FHB.

Due to the fact that First Hawaiian, Inc. (NASDAQ:FHB) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that slashed their positions entirely last quarter. At the top of the heap, Mika Toikka’s AlphaCrest Capital Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $1.1 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as First Hawaiian, Inc. (NASDAQ:FHB) but similarly valued. These stocks are CNO Financial Group Inc (NYSE:CNO), Acadia Healthcare Company Inc (NASDAQ:ACHC), FormFactor, Inc. (NASDAQ:FORM), IGM Biosciences, Inc. (NASDAQ:IGMS), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), TG Therapeutics Inc (NASDAQ:TGTX), and Sabre Corporation (NASDAQ:SABR). This group of stocks’ market caps resemble FHB’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $375 million. That figure was $147 million in FHB’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand IGM Biosciences, Inc. (NASDAQ:IGMS) is the least popular one with only 16 bullish hedge fund positions. First Hawaiian, Inc. (NASDAQ:FHB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FHB is 38.4. 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. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately FHB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); FHB investors were disappointed as the stock returned -14.7% in the third 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.

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