Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Frontline Ltd. (NYSE:FRO) has experienced a decrease in hedge fund interest lately. There were 11 hedge funds in our database with FRO positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Quotient Technology Inc(NYSE:QUOT), Trade Desk Inc (NASDAQ:TTD), and Multi Packaging Solutions Intrntnl Ltd (NYSE:MPSX) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s take a peek at the latest action regarding Frontline Ltd. (NYSE:FRO).
How have hedgies been trading Frontline Ltd. (NYSE:FRO)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2016. By comparison, 11 hedge funds held shares or bullish call options in FRO heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Daniel Gold’s QVT Financial holds the number one position in Frontline Ltd. (NYSE:FRO). QVT Financial has a $2.9 million position in the stock. Coming in second is Steve Cohen’s Point72 Asset Management holding a $2.3 million position. Remaining professional money managers that hold long positions encompass Paul Marshall and Ian Wace’s Marshall Wace LLP, and Israel Englander’s Millennium Management one of the 10 largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. At the top of the heap, Robert B. Gillam’s McKinley Capital Management cut the biggest investment of all the investors monitored by Insider Monkey, valued at about $1.2 million in stock. Peter Muller’s fund, PDT Partners, also said goodbye to its stock, about $0.6 million worth.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Frontline Ltd. (NYSE:FRO) but similarly valued. We will take a look at Quotient Technology Inc(NYSE:QUOT), Trade Desk Inc (NASDAQ:TTD), Multi Packaging Solutions Intrntnl Ltd (NYSE:MPSX), and CONMED Corporation (NASDAQ:CNMD). This group of stocks’ market caps are similar to FRO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QUOT | 15 | 41797 | 8 |
| TTD | 9 | 10656 | 9 |
| MPSX | 10 | 34161 | -7 |
| CNMD | 15 | 206084 | -1 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $9 million in FRO’s case. Quotient Technology Inc(NYSE:QUOT) is the most popular stock in this table. On the other hand Trade Desk Inc (NASDAQ:TTD) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Frontline Ltd. (NYSE:FRO) is even less popular than TTD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
