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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about First Horizon National Corporation (NYSE:FHN).
Hedge fund interest in First Horizon National Corporation (NYSE:FHN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that FHN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Denali Therapeutics Inc. (NASDAQ:DNLI), Braskem SA (NYSE:BAK), and Arrival (NASDAQ:ARVL) to gather more data points.
At the moment there are plenty of indicators stock traders have at their disposal to evaluate stocks. Two of the most underrated indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform the S&P 500 by a superb margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Michael Gelband of ExodusPoint Capital
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 review the new hedge fund action surrounding First Horizon National Corporation (NYSE:FHN).
Do Hedge Funds Think FHN Is A Good Stock To Buy Now?
At Q2's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FHN over the last 24 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in First Horizon National Corporation (NYSE:FHN) was held by Schonfeld Strategic Advisors, which reported holding $35.1 million worth of stock at the end of June. It was followed by Millennium Management with a $19.2 million position. Other investors bullish on the company included Huber Capital Management, Forest Hill Capital, and Prospector Partners. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to First Horizon National Corporation (NYSE:FHN), around 3.81% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, designating 3.76 percent of its 13F equity portfolio to FHN.
Seeing as First Horizon National Corporation (NYSE:FHN) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedgies that slashed their full holdings by the end of the second quarter. Intriguingly, Stanley Druckenmiller's Duquesne Capital said goodbye to the largest position of the 750 funds monitored by Insider Monkey, comprising close to $33 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also dropped its stock, about $30 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to First Horizon National Corporation (NYSE:FHN). We will take a look at Denali Therapeutics Inc. (NASDAQ:DNLI), Braskem SA (NYSE:BAK), Arrival (NASDAQ:ARVL), Aramark (NYSE:ARMK), Canopy Growth Corporation (NYSE:CGC), Cricut, Inc. (NASDAQ:CRCT), and Assurant, Inc. (NYSE:AIZ). This group of stocks' market valuations resemble FHN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DNLI,22,300703,-4 BAK,6,16591,-2 ARVL,17,117875,3 ARMK,36,1125117,-3 CGC,16,171734,4 CRCT,13,241275,1 AIZ,26,945271,-1 Average,19.4,416938,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $152 million in FHN's case. Aramark (NYSE:ARMK) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 6 bullish hedge fund positions. First Horizon National Corporation (NYSE:FHN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FHN is 63.1. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately FHN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FHN were disappointed as the stock returned -1.8% since the end of June (through 10/15) 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.