Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like St. Joe Co (NYSE:JOE) .
Is St. Joe Co (NYSE:JOE) a buy, sell, or hold? Money managers are indeed betting on the stock. The number of bullish hedge fund bets that are revealed through the 13F filings advanced by 3 recently. JOEwas in 12 hedge funds’ portfolios at the end of the third quarter of 2016. There were 9 hedge funds in our database with JOE 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 Group 1 Automotive, Inc. (NYSE:GPI), ServisFirst Bancshares, Inc. (NASDAQ:SFBS), and Acceleron Pharma Inc (NASDAQ:XLRN) to gather more data points.
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Follow St Joe Co (NYSE:JOE)
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.
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With all of this in mind, we’re going to view the fresh action regarding St. Joe Co (NYSE:JOE).
Hedge fund activity in St. Joe Co (NYSE:JOE)
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JOE over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s elite fund database, Fairholme (FAIRX), led by Bruce Berkowitz, holds the number one position in St. Joe Co (NYSE:JOE). Fairholme (FAIRX) has a $449.3 million position in the stock, comprising 36% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, which holds a $20.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism encompass Chuck Royce’s Royce & Associates, Thomas E. Claugus’s GMT Capital and Renaissance Technologies, one of the largest hedge funds in the world. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, key money managers were breaking ground themselves. Marshall Wace LLP, led by Paul Marshall and Ian Wace, initiated the biggest position in St. Joe Co (NYSE:JOE). Marshall Wace LLP had $0.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.4 million investment in the stock during the quarter. The other funds with brand new JOE positions are Ken Griffin’s Citadel Investment Group, Andrew Weiss’s Weiss Asset Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TSt. Joe Co (NYSE:JOE) but similarly valued. These stocks are Group 1 Automotive, Inc. (NYSE:GPI), ServisFirst Bancshares, Inc. (NASDAQ:SFBS), Acceleron Pharma Inc (NASDAQ:XLRN), and SkyWest, Inc. (NASDAQ:SKYW). This group of stocks’ market values are similar to JOE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPI | 19 | 283041 | -1 |
| SFBS | 6 | 12089 | 1 |
| XLRN | 22 | 158390 | 1 |
| SKYW | 17 | 55666 | 4 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $484 million in JOE’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is the least popular one with only 6 bullish hedge fund positions. St. Joe Co (NYSE:JOE) 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 XLRN might be a better candidate to consider taking a long position in.
