How FRP Holdings Inc (FRPH) Stacks Up Against Its Peers

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like FRP Holdings Inc (NASDAQ:FRPH).

FRP Holdings Inc (NASDAQ:FRPH) investors should be aware of an increase in activity from the world’s largest hedge funds of late. FRPH was in 6 hedge funds’ portfolios at the end of the third quarter of 2016. There were 5 hedge funds in our database with FRPH positions at the end of the second quarter. At the end of this article we will also compare FRPH to other stocks including Davids Tea Inc (NASDAQ:DTEA), Silicom Ltd. (NASDAQ:SILC), and EXCO Resources Inc (NYSE:XCO) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Stuart Monk / shutterstock.com

How are hedge funds trading FRP Holdings Inc (NASDAQ:FRPH)?

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 20% increase from the second quarter of 2016. The graph below displays the number of hedge funds with bullish positions in FRPH over the last 5 quarters, which has remained at between 5 and 6 hedge funds. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in FRP Holdings Inc (NASDAQ:FRPH), worth close to $24.6 million. On Royce & Associates’ heels is Rutabaga Capital Management, led by Peter Schliemann, which holds an $8.1 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include Eric Sprott’s Sprott Asset Management, Jeffrey Bronchick’s Cove Street Capital, and Amy Minella’s Cardinal Capital. We should note that Sprott Asset Management is among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Now, key hedge funds were leading the bulls’ herd. Cove Street Capital established the most outsized position in FRP Holdings Inc (NASDAQ:FRPH). Cove Street Capital had $2.2 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as FRP Holdings Inc (NASDAQ:FRPH) but similarly valued. We will take a look at Davids Tea Inc (NASDAQ:DTEA), Silicom Ltd. (NASDAQ:SILC), EXCO Resources Inc (NYSE:XCO), and Newcastle Investment Corp. (NYSE:NCT). This group of stocks’ market valuations match FRPH’s market valuation.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $40 million in FRPH’s case. EXCO Resources Inc (NYSE:XCO) is the most popular stock in this table. On the other hand Davids Tea Inc (NASDAQ:DTEA) is the least popular one with only 4 bullish hedge fund positions. FRP Holdings Inc (NASDAQ:FRPH) 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. In this regard XCO might be a better candidate to consider taking a long position in.

Disclosure: None