Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Tiptree Inc. (NASDAQ:TIPT) to find out whether there were any major changes in hedge funds’ views.
Hedge fund interest in Tiptree Inc. (NASDAQ:TIPT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TIPT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Orphazyme A/S (NASDAQ:ORPH), Precision Drilling Corp (NYSE:PDS), and RR Donnelley & Sons Company (NASDAQ:RRD) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Fred DiSanto of Ancora Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a glance at the recent hedge fund action surrounding Tiptree Inc. (NASDAQ:TIPT).
Do Hedge Funds Think TIPT Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in TIPT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions)..
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in Tiptree Inc. (NASDAQ:TIPT), worth close to $2.5 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Ancora Advisors, led by Frederick DiSanto, holding a $1.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to Tiptree Inc. (NASDAQ:TIPT), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0031 percent of its 13F equity portfolio to TIPT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks similar to Tiptree Inc. (NASDAQ:TIPT). We will take a look at Orphazyme A/S (NASDAQ:ORPH), Precision Drilling Corp (NYSE:PDS), RR Donnelley & Sons Company (NASDAQ:RRD), Escalade, Inc. (NASDAQ:ESCA), Bluegreen Vacations Holding Corporation (NYSE:BVH), Trevena Inc (NASDAQ:TRVN), and Mayville Engineering Company, Inc. (NYSE:MEC). All of these stocks’ market caps match TIPT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORPH | 3 | 2309 | 1 |
| PDS | 6 | 25038 | 0 |
| RRD | 23 | 65071 | 10 |
| ESCA | 3 | 10058 | -3 |
| BVH | 6 | 29254 | 0 |
| TRVN | 14 | 8402 | 7 |
| MEC | 3 | 3530 | 0 |
| Average | 8.3 | 20523 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $5 million in TIPT’s case. RR Donnelley & Sons Company (NASDAQ:RRD) is the most popular stock in this table. On the other hand Orphazyme A/S (NASDAQ:ORPH) is the least popular one with only 3 bullish hedge fund positions. Tiptree Inc. (NASDAQ:TIPT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TIPT is 24.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on TIPT as the stock returned 17.9% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
