Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in First Financial Corp (NASDAQ:THFF)? The smart money sentiment can provide an answer to this question.
First Financial Corp (NASDAQ:THFF) investors should pay attention to a decrease in enthusiasm from smart money recently. Our calculations also showed that THFF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the latest hedge fund action regarding First Financial Corp (NASDAQ:THFF).
How have hedgies been trading First Financial Corp (NASDAQ:THFF)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in THFF a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of First Financial Corp (NASDAQ:THFF), with a stake worth $7.8 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $3.1 million. Winton Capital Management, Two Sigma Advisors, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to First Financial Corp (NASDAQ:THFF), around 0.34% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to THFF.
Because First Financial Corp (NASDAQ:THFF) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds who were dropping their full holdings in the third quarter. Interestingly, Israel Englander’s Millennium Management sold off the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $2.4 million in stock. Noam Gottesman’s fund, GLG Partners, also dropped its stock, about $1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as First Financial Corp (NASDAQ:THFF) but similarly valued. We will take a look at Peoples Utah Bancorp (NASDAQ:PUB), Gannett Co., Inc. (NYSE:NEWM), TG Therapeutics Inc (NASDAQ:TGTX), and Kodiak Sciences Inc (NASDAQ:KOD). This group of stocks’ market valuations match THFF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PUB | 6 | 16721 | 3 |
| NEWM | 19 | 164290 | 5 |
| TGTX | 18 | 114737 | 1 |
| KOD | 6 | 204922 | -2 |
| Average | 12.25 | 125168 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $15 million in THFF’s case. New Media Investment Group Inc (NYSE:NEWM) is the most popular stock in this table. On the other hand Peoples Utah Bancorp (NASDAQ:PUB) is the least popular one with only 6 bullish hedge fund positions. First Financial Corp (NASDAQ:THFF) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately THFF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); THFF investors were disappointed as the stock returned 1.7% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
