The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded First Horizon National Corporation (NYSE:FHN) and determine whether the smart money was really smart about this stock.
First Horizon National Corporation (NYSE:FHN) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that FHN 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 58 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.
[caption id="attachment_255014" align="aligncenter" width="392"] Clint Carlson of Carlson Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we're going to take a glance at the key hedge fund action regarding First Horizon National Corporation (NYSE:FHN).
What have hedge funds been doing with First Horizon National Corporation (NYSE:FHN)?
Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in FHN over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of First Horizon National Corporation (NYSE:FHN), with a stake worth $87.4 million reported as of the end of September. Trailing Citadel Investment Group was Carlson Capital, which amassed a stake valued at $31 million. Arrowstreet Capital, Balyasny Asset Management, and Azora Capital 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 Azora Capital allocated the biggest weight to First Horizon National Corporation (NYSE:FHN), around 7.68% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, dishing out 2.46 percent of its 13F equity portfolio to FHN.
As one would reasonably expect, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in First Horizon National Corporation (NYSE:FHN). Arrowstreet Capital had $20.4 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $20.2 million investment in the stock during the quarter. The following funds were also among the new FHN investors: Ravi Chopra's Azora Capital, Anton Schutz's Mendon Capital Advisors, and Greg Eisner's Engineers Gate Manager.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as First Horizon National Corporation (NYSE:FHN) but similarly valued. These stocks are MasTec, Inc. (NYSE:MTZ), AutoNation, Inc. (NYSE:AN), Avnet, Inc. (NASDAQ:AVT), and Werner Enterprises, Inc. (NASDAQ:WERN). All of these stocks' market caps match FHN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTZ,24,99669,-17 AN,27,256418,-4 AVT,24,453381,-9 WERN,17,161749,-4 Average,23,242804,-8.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $243 million in FHN's case. AutoNation, Inc. (NYSE:AN) is the most popular stock in this table. On the other hand Werner Enterprises, Inc. (NASDAQ:WERN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks First Horizon National Corporation (NYSE:FHN) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on FHN, though not to the same extent, as the stock returned 25.3% in Q2 and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.