After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards First Defiance Financial (NASDAQ:FDEF).
First Defiance Financial (NASDAQ:FDEF) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare FDEF to other stocks including Caesarstone Ltd. (NASDAQ:CSTE), City Office REIT Inc (NYSE:CIO), and Flushing Financial Corporation (NASDAQ:FFIC) to get a better sense of its popularity. Video: Click the image to 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' 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.
[caption id="attachment_189632" align="aligncenter" width="600"] David Harding of Winton Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a look at the latest hedge fund action regarding First Defiance Financial (NASDAQ:FDEF).
Hedge fund activity in First Defiance Financial (NASDAQ:FDEF)
At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FDEF over the last 17 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in First Defiance Financial (NASDAQ:FDEF) was held by Renaissance Technologies, which reported holding $24.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $4.9 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Winton Capital Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to First Defiance Financial (NASDAQ:FDEF), around 0.02% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to FDEF.
Since First Defiance Financial (NASDAQ:FDEF) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedge funds that slashed their full holdings heading into Q4. Intriguingly, Michael Gelband's ExodusPoint Capital cut the biggest position of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $0.3 million in stock. Roger Ibbotson's fund, Zebra Capital Management, also sold off its stock, about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to First Defiance Financial (NASDAQ:FDEF). These stocks are Caesarstone Ltd. (NASDAQ:CSTE), City Office REIT Inc (NYSE:CIO), Flushing Financial Corporation (NASDAQ:FFIC), and Dorian LPG Ltd (NYSE:LPG). This group of stocks' market valuations match FDEF's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSTE,9,27696,0 CIO,11,73563,5 FFIC,12,43530,4 LPG,19,141816,9 Average,12.75,71651,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $40 million in FDEF's case. Dorian LPG Ltd (NYSE:LPG) is the most popular stock in this table. On the other hand Caesarstone Ltd. (NASDAQ:CSTE) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks First Defiance Financial (NASDAQ:FDEF) is even less popular than CSTE. Hedge funds dodged a bullet by taking a bearish stance towards FDEF. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FDEF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FDEF investors were disappointed as the stock returned 4.8% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.