We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards PHH Corporation (NYSE:PHH), and what that likely means for the prospects of the company and its stock.
PHH Corporation (NYSE:PHH) investors should pay attention to an increase in activity from the world’s largest hedge funds. At the end of September, 20 funds tracked by Insider Monkey held shares of PHH, up by three funds over the quarter. At the end of this article we will also compare PHH to other stocks including Cardinal Financial Corporation (NASDAQ:CFNL), Flotek Industries Inc (NYSE:FTK), and National Western Life Insurance Company (NASDAQ:NWLI) to get a better sense of its popularity.
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Keeping this in mind, let’s analyze the fresh action surrounding PHH Corporation (NYSE:PHH).
What have hedge funds been doing with PHH Corporation (NYSE:PHH)?
As mentioned earlier, heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, which represents an increase of 18% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in PHH heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Larry Robbins’ Glenview Capital has the largest position in PHH Corporation (NYSE:PHH), worth close to $68.2 million, comprising 0.5% of its total 13F portfolio. On Glenview Capital’s heels is Silver Point Capital, led by Edward A. Mule, which holds a $63.7 million position; the fund has 9.5% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Gunnar Overstrom’s Three Corner Global Investors and Jim Simons’ Renaissance Technologies. 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.
As industrywide interest jumped, some big names were breaking ground themselves. Carlson Capital, led by Clint Carlson, assembled the most valuable position in PHH Corporation (NYSE:PHH). Carlson Capital had $19.4 million invested in the company at the end of the quarter. Larry Foley and Paul Farrell’s Bronson Point Partners also initiated a $6.9 million position during the quarter. The other funds with brand new PHH positions are John Overdeck and David Siegel’s Two Sigma Advisors, Matthew Tewksbury’s Stevens Capital Management, and David Costen Haley’s HBK Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PHH Corporation (NYSE:PHH) but similarly valued. We will take a look at Cardinal Financial Corporation (NASDAQ:CFNL), Flotek Industries Inc (NYSE:FTK), National Western Life Insurance Company (NASDAQ:NWLI), and Re/Max Holdings Inc (NYSE:RMAX). This group of stocks’ market valuations match PHH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CFNL | 11 | 70084 | 2 |
| FTK | 16 | 167644 | 5 |
| NWLI | 7 | 13390 | 0 |
| RMAX | 4 | 25202 | -2 |
As you can see these stocks had an average of 10 funds with bullish positions and the average amount invested in these stocks was $69 million, versus $271 million in PHH’s case. Flotek Industries Inc (NYSE:FTK) is the most popular stock in this table. On the other hand Re/Max Holdings Inc (NYSE:RMAX) is the least popular one with only four investors holding shares. Compared to these stocks PHH Corporation (NYSE:PHH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
