Should You Buy FRP Holdings Inc (FRPH)?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze FRP Holdings Inc (NASDAQ:FRPH) from the perspective of those elite funds.

FRP Holdings Inc (NASDAQ:FRPH) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the third quarter of 2015. 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 Digi International Inc. (NASDAQ:DGII), PHI Inc. (NASDAQ:PHIIK), and Republic Airways Holdings Inc. (NASDAQ:RJET) to gather more data points.

In the eyes of most investors, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, Our researchers choose to focus on the top tier of this club, approximately 700 funds. These hedge fund managers preside over bulk of all hedge funds’ total asset base, and by keeping an eye on their first-class picks, Insider Monkey has unsheathed a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, we’re going to review the latest action encompassing FRP Holdings Inc (NASDAQ:FRPH).

How have hedgies been trading FRP Holdings Inc (NASDAQ:FRPH)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in FRP Holdings Inc (NASDAQ:FRPH), worth close to $29.8 million, amounting to 0.2% of its total 13F portfolio. Coming in second is Rutabaga Capital Management, managed by Peter Schliemann, which holds an $6.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Amy Minella’s Cardinal Capital, Jeffrey Bronchick’s Cove Street Capital and Mark Travis’s Intrepid Capital Management.

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 also examine hedge fund activity in other stocks similar to FRP Holdings Inc (NASDAQ:FRPH). We will take a look at Digi International Inc. (NASDAQ:DGII), PHI Inc. (NASDAQ:PHIIK), Republic Airways Holdings Inc. (NASDAQ:RJET), and Central European Media Enterprises Ltd. (NASDAQ:CETV). This group of stocks’ market caps are similar to FRPH’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $41 million in FRPH’s case. Republic Airways Holdings Inc. (NASDAQ:RJET) is the most popular stock in this table, while PHI Inc. (NASDAQ:PHIIK) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks FRP Holdings Inc (NASDAQ:FRPH) is even less popular than PHIIK. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.