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Hedge Funds Are Cashing Out Of The Howard Hughes Corporation (HHC)

·6 min read

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was The Howard Hughes Corporation (NYSE:HHC).

Is The Howard Hughes Corporation (NYSE:HHC) the right investment to pursue these days? The smart money was becoming less hopeful. The number of bullish hedge fund positions retreated by 2 recently. The Howard Hughes Corporation (NYSE:HHC) was in 25 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that HHC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 27 hedge funds in our database with HHC positions at the end of the first quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Can hedge funds beat the market
Can hedge funds beat the market

Bill Ackman of Pershing Square

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's view the key hedge fund action regarding The Howard Hughes Corporation (NYSE:HHC).

Do Hedge Funds Think HHC Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the first quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in HHC a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Bill Ackman's Pershing Square has the most valuable position in The Howard Hughes Corporation (NYSE:HHC), worth close to $1.3128 billion, corresponding to 12.3% of its total 13F portfolio. The second largest stake is held by Cardinal Capital, led by Amy Minella, holding a $96.8 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Murray Stahl's Horizon Asset Management, Mubadala Investment's MIC Capital Partners and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to The Howard Hughes Corporation (NYSE:HHC), around 12.26% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, designating 7.95 percent of its 13F equity portfolio to HHC.

Seeing as The Howard Hughes Corporation (NYSE:HHC) has witnessed falling interest from hedge fund managers, it's easy to see that there was a specific group of funds that elected to cut their entire stakes last quarter. At the top of the heap, Morris Mark's Mark Asset Management dropped the largest position of the "upper crust" of funds monitored by Insider Monkey, worth about $12.3 million in stock. George Soros's fund, Soros Fund Management, also sold off its stock, about $1.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to The Howard Hughes Corporation (NYSE:HHC). These stocks are Medallia, Inc. (NYSE:MDLA), HollyFrontier Corporation (NYSE:HFC), SolarWinds Corporation (NYSE:SWI), Iridium Communications Inc. (NASDAQ:IRDM), Schrodinger, Inc. (NASDAQ:SDGR), Lancaster Colony Corporation (NASDAQ:LANC), and Chart Industries, Inc. (NYSE:GTLS). This group of stocks' market values match HHC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDLA,23,364169,4 HFC,30,319391,10 SWI,21,1230054,-1 IRDM,18,705019,-4 SDGR,20,941274,3 LANC,18,294439,-4 GTLS,27,327346,8 Average,22.4,597385,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $597 million. That figure was $1670 million in HHC's case. HollyFrontier Corporation (NYSE:HFC) is the most popular stock in this table. On the other hand Iridium Communications Inc. (NASDAQ:IRDM) is the least popular one with only 18 bullish hedge fund positions. The Howard Hughes Corporation (NYSE:HHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HHC is 54.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately HHC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on HHC were disappointed as the stock returned -4.8% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.