Is FTDR Stock A Buy or Sell?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of frontdoor, inc. (NASDAQ:FTDR).

Is FTDR stock a buy? frontdoor, inc. (NASDAQ:FTDR) investors should pay attention to a decrease in support from the world’s most elite money managers lately. frontdoor, inc. (NASDAQ:FTDR) was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 41. There were 38 hedge funds in our database with FTDR holdings at the end of September. Our calculations also showed that FTDR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here). 

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind we’re going to take a look at the recent hedge fund action regarding frontdoor, inc. (NASDAQ:FTDR).

Do Hedge Funds Think FTDR Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FTDR over the last 22 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the biggest position in frontdoor, inc. (NASDAQ:FTDR). Iridian Asset Management has a $132.8 million position in the stock, comprising 2.4% of its 13F portfolio. The second most bullish fund of Renaissance Technologies, with a $99.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish contain Richard Mashaal’s Rima Senvest Management, Lee Ainslie’s Maverick Capital and Jeffrey Gates’s Gates Capital Management. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to frontdoor, inc. (NASDAQ:FTDR), around 13.72% of its 13F portfolio. Impactive Capital is also relatively very bullish on the stock, dishing out 10.08 percent of its 13F equity portfolio to FTDR.

Due to the fact that frontdoor, inc. (NASDAQ:FTDR) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds who were dropping their entire stakes in the fourth quarter. It’s worth mentioning that Ira Unschuld’s Brant Point Investment Management sold off the biggest position of the 750 funds monitored by Insider Monkey, worth close to $3.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $3.3 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to frontdoor, inc. (NASDAQ:FTDR). These stocks are Premier Inc (NASDAQ:PINC), Alcoa Corporation (NYSE:AA), ChemoCentryx Inc (NASDAQ:CCXI), Altair Engineering Inc. (NASDAQ:ALTR), Valvoline Inc. (NYSE:VVV), The Hanover Insurance Group, Inc. (NYSE:THG), and Inari Medical, Inc. (NASDAQ:NARI). All of these stocks’ market caps match FTDR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $435 million. That figure was $904 million in FTDR’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Altair Engineering Inc. (NASDAQ:ALTR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks frontdoor, inc. (NASDAQ:FTDR) is more popular among hedge funds. Our overall hedge fund sentiment score for FTDR is 81.1. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on FTDR as the stock returned 9.9% since the end of December (through 4/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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