We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like frontdoor, inc. (NASDAQ:FTDR). We will also compare FTDR's popularity against similarly valued stocks like Compania Cervecerias Unidas S.A. (NYSE:CCU), Cabot Microelectronics Corporation (NASDAQ:CCMP), NCR Corporation (NYSE:NCR), and Enstar Group Ltd. (NASDAQ:ESGR).
frontdoor, inc. (NASDAQ:FTDR) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that FTDR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous gauges stock market investors employ to evaluate publicly traded companies. Two of the most under-the-radar gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outpace the S&P 500 by a solid margin (see the details here).
[caption id="attachment_30668" align="aligncenter" width="478"] Richard Chilton of Chilton Investment Company[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the fresh hedge fund action regarding frontdoor, inc. (NASDAQ:FTDR).
How are hedge funds trading frontdoor, inc. (NASDAQ:FTDR)?
At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in FTDR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in frontdoor, inc. (NASDAQ:FTDR) was held by Iridian Asset Management, which reported holding $160.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $79 million position. Other investors bullish on the company included Engle Capital, Chilton Investment Company, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Engle Capital allocated the biggest weight to frontdoor, inc. (NASDAQ:FTDR), around 17.4% of its portfolio. StackLine Partners is also relatively very bullish on the stock, earmarking 11.38 percent of its 13F equity portfolio to FTDR.
Seeing as frontdoor, inc. (NASDAQ:FTDR) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few money managers that decided to sell off their full holdings last quarter. It's worth mentioning that John Lykouretzos's Hoplite Capital Management sold off the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $48.8 million in stock, and Ravee Mehta's Nishkama Capital was right behind this move, as the fund dumped about $11.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.
Let's check out hedge fund activity in other stocks similar to frontdoor, inc. (NASDAQ:FTDR). These stocks are Compania Cervecerias Unidas S.A. (NYSE:CCU), Cabot Microelectronics Corporation (NASDAQ:CCMP), NCR Corporation (NYSE:NCR), and Enstar Group Ltd. (NASDAQ:ESGR). This group of stocks' market caps match FTDR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCU,9,32949,-1 CCMP,15,348635,2 NCR,31,284836,7 ESGR,12,415383,2 Average,16.75,270451,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $270 million. That figure was $736 million in FTDR's case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks frontdoor, inc. (NASDAQ:FTDR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FTDR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FTDR were disappointed as the stock returned -6.8% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.