In this article we will take a look at whether hedge funds think Tiptree Inc. (NASDAQ:TIPT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Tiptree Inc. (NASDAQ:TIPT) a cheap investment today? The smart money is becoming more confident. The number of bullish hedge fund bets moved up by 1 in recent months. Our calculations also showed that TIPT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Griffin of Citadel Investment Group
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the latest hedge fund action regarding Tiptree Inc. (NASDAQ:TIPT).
How have hedgies been trading Tiptree Inc. (NASDAQ:TIPT)?
Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TIPT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Frederick DiSanto’s Ancora Advisors has the number one position in Tiptree Inc. (NASDAQ:TIPT), worth close to $0.8 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Ken Griffin’s Citadel Investment Group, Renaissance Technologies 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. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0003 percent of its 13F equity portfolio to TIPT.
As industrywide interest jumped, key money managers have jumped into Tiptree Inc. (NASDAQ:TIPT) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most valuable position in Tiptree Inc. (NASDAQ:TIPT). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tiptree Inc. (NASDAQ:TIPT) but similarly valued. We will take a look at Premier Financial Bancorp, Inc. (NASDAQ:PFBI), Farmland Partners Inc (NYSE:FPI), Standard Diversified Inc. (NYSE:SDI), and Business First Bancshares, Inc. (NASDAQ:BFST). This group of stocks’ market caps are closest to TIPT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFBI | 3 | 4473 | 0 |
| FPI | 7 | 2795 | 1 |
| SDI | 5 | 7158 | 1 |
| BFST | 4 | 8748 | 1 |
| Average | 4.75 | 5794 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $1 million in TIPT’s case. Farmland Partners Inc (NYSE:FPI) is the most popular stock in this table. On the other hand Premier Financial Bancorp, Inc. (NASDAQ:PFBI) 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately TIPT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TIPT investors were disappointed as the stock returned 17.6% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
