Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of First Hawaiian, Inc. (NASDAQ:FHB).
First Hawaiian, Inc. (NASDAQ:FHB) was in 28 hedge funds' portfolios at the end of September. FHB shareholders have witnessed an increase in enthusiasm from smart money of late. There were 20 hedge funds in our database with FHB positions at the end of the previous quarter. Our calculations also showed that FHB isn't among the 30 most popular stocks among hedge funds.
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 the 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We're going to take a look at the fresh hedge fund action surrounding First Hawaiian, Inc. (NASDAQ:FHB).
Hedge fund activity in First Hawaiian, Inc. (NASDAQ:FHB)
Heading into the fourth quarter of 2018, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FHB over the last 13 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin's Citadel Investment Group has the largest position in First Hawaiian, Inc. (NASDAQ:FHB), worth close to $84.7 million, accounting for less than 0.1% of its total 13F portfolio. Coming in second is Element Capital Management, led by Jeffrey Talpins, holding a $74.9 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Scott Bessent's Key Square Capital Management.
As aggregate interest increased, some big names have been driving this bullishness. Element Capital Management, managed by Jeffrey Talpins, initiated the most valuable position in First Hawaiian, Inc. (NASDAQ:FHB). Element Capital Management had $74.9 million invested in the company at the end of the quarter. Scott Bessent's Key Square Capital Management also made a $40.7 million investment in the stock during the quarter. The following funds were also among the new FHB investors: Clint Carlson's Carlson Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Emanuel J. Friedman's EJF Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as First Hawaiian, Inc. (NASDAQ:FHB) but similarly valued. These stocks are Healthcare Realty Trust Inc (NYSE:HR), Investors Bancorp, Inc. (NASDAQ:ISBC), NuVasive, Inc. (NASDAQ:NUVA), and Stifel Financial Corp. (NYSE:SF). This group of stocks' market values resemble FHB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HR,4,15302,-4 ISBC,33,777417,6 NUVA,22,349724,-1 SF,12,249082,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $477 million in FHB's case. Investors Bancorp, Inc. (NASDAQ:ISBC) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 4 bullish hedge fund positions. First Hawaiian, Inc. (NASDAQ:FHB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard ISBC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.