Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves.
Is The Howard Hughes Corporation (NYSE:HHC) worth your attention right now? Money managers are buying. The number of long hedge fund bets moved up by 4 in recent months. Our calculations also showed that HHC isn’t among the 30 most popular stocks among hedge funds. HHC was in 26 hedge funds’ portfolios at the end of June. There were 22 hedge funds in our database with HHC positions at the end of the previous quarter.
In the financial world there are a large number of indicators market participants put to use to evaluate publicly traded companies. A pair of the most underrated indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can trounce the S&P 500 by a healthy margin (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the key hedge fund action encompassing The Howard Hughes Corporation (NYSE:HHC).
How have hedgies been trading The Howard Hughes Corporation (NYSE:HHC)?
At Q2’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in HHC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Howard Hughes Corporation (NYSE:HHC) was held by Horizon Asset Management, which reported holding $207.3 million worth of stock at the end of March. It was followed by Pershing Square with a $148 million position. Other investors bullish on the company included Cardinal Capital, Pentwater Capital Management, and AEW Capital Management.
As industrywide interest jumped, some big names have been driving this bullishness. Pentwater Capital Management, managed by Matthew Halbower, assembled the largest position in The Howard Hughes Corporation (NYSE:HHC). Pentwater Capital Management had $42.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $14.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Isaac Corre’s Governors Lane, Matthew Halbower’s Pentwater Capital Management, and Emanuel J. Friedman’s EJF Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Howard Hughes Corporation (NYSE:HHC) but similarly valued. These stocks are Allison Transmission Holdings Inc (NYSE:ALSN), IAA, Inc. (NYSE:IAA), LATAM Airlines Group S.A. (NYSE:LTM), and Quanta Services Inc (NYSE:PWR). This group of stocks’ market caps resemble HHC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALSN | 25 | 894810 | -3 |
| IAA | 42 | 908956 | 42 |
| LTM | 5 | 17929 | -3 |
| PWR | 29 | 539950 | 5 |
| Average | 25.25 | 590411 | 10.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $590 million. That figure was $551 million in HHC’s case. IAA, Inc. (NYSE:IAA) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 5 bullish hedge fund positions. The Howard Hughes Corporation (NYSE:HHC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on HHC, though not to the same extent, as the stock returned 4.7% during the third quarter and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
