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Do Hedge Funds Love Safehold Inc. (SAFE)?

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Safehold Inc. (NYSE:SAFE).

Hedge fund interest in Safehold Inc. (NYSE:SAFE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SAFE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Vivint Smart Home, Inc. (NYSE:VVNT), National Beverage Corp. (NASDAQ:FIZZ), and The Howard Hughes Corporation (NYSE:HHC) to gather more data points.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

NAVELLIER & ASSOCIATES
NAVELLIER & ASSOCIATES

Louis Navellier of Navellier & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a look at the new hedge fund action regarding Safehold Inc. (NYSE:SAFE).

How are hedge funds trading Safehold Inc. (NYSE:SAFE)?

At Q3's end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in SAFE a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Safehold Inc. (NYSE:SAFE). Citadel Investment Group has a $3.1 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which holds a $2.9 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism comprise Matthew Hulsizer's PEAK6 Capital Management, Matthew Hulsizer's PEAK6 Capital Management and Louis Navellier's Navellier & Associates. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Safehold Inc. (NYSE:SAFE), around 0.18% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to SAFE.

Due to the fact that Safehold Inc. (NYSE:SAFE) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedgies that elected to cut their entire stakes heading into Q4. It's worth mentioning that Israel Englander's Millennium Management sold off the largest stake of the 750 funds monitored by Insider Monkey, valued at close to $1.1 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $1 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks similar to Safehold Inc. (NYSE:SAFE). These stocks are Vivint Smart Home, Inc. (NYSE:VVNT), National Beverage Corp. (NASDAQ:FIZZ), The Howard Hughes Corporation (NYSE:HHC), PTC Therapeutics, Inc. (NASDAQ:PTCT), Balchem Corporation (NASDAQ:BCPC), Verint Systems Inc. (NASDAQ:VRNT), and AAON, Inc. (NASDAQ:AAON). All of these stocks' market caps resemble SAFE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VVNT,5,8042,0 FIZZ,23,300383,2 HHC,31,858126,3 PTCT,25,209866,-6 BCPC,16,76494,-1 VRNT,27,428732,2 AAON,16,51732,1 Average,20.4,276196,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $276 million. That figure was $7 million in SAFE's case. The Howard Hughes Corporation (NYSE:HHC) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 5 bullish hedge fund positions. Safehold Inc. (NYSE:SAFE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SAFE is 35.1. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately SAFE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SAFE investors were disappointed as the stock returned 5.3% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.

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

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