Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of First Horizon National Corporation (NYSE:FHN) based on that data and determine whether they were really smart about the stock.
Is First Horizon National Corporation (NYSE:FHN) a cheap investment right now? The best stock pickers were taking an optimistic view. The number of long hedge fund bets increased by 4 recently. First Horizon National Corporation (NYSE:FHN) was in 35 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FHN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with FHN positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Donald Sussman of Paloma Partners
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now we're going to take a look at the key hedge fund action encompassing First Horizon National Corporation (NYSE:FHN).
How have hedgies been trading First Horizon National Corporation (NYSE:FHN)?
Heading into the third quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FHN over the last 20 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in First Horizon National Corporation (NYSE:FHN) was held by Citadel Investment Group, which reported holding $115 million worth of stock at the end of September. It was followed by Carlson Capital with a $85.1 million position. Other investors bullish on the company included Millennium Management, Adage Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to First Horizon National Corporation (NYSE:FHN), around 4.06% of its 13F portfolio. Second Curve Capital is also relatively very bullish on the stock, earmarking 3.89 percent of its 13F equity portfolio to FHN.
As aggregate interest increased, key hedge funds have jumped into First Horizon National Corporation (NYSE:FHN) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most valuable position in First Horizon National Corporation (NYSE:FHN). Adage Capital Management had $26.3 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $8.6 million investment in the stock during the quarter. The following funds were also among the new FHN investors: Emanuel J. Friedman's EJF Capital, Mark Lee's Forest Hill Capital, and Sander Gerber's Hudson Bay Capital Management.
Let's also examine hedge fund activity in other stocks similar to First Horizon National Corporation (NYSE:FHN). We will take a look at TFI International Inc. (NYSE:TFII), Vicor Corp (NASDAQ:VICR), New Residential Investment Corp (NYSE:NRZ), Companhia Paranaense de Energia (NYSE:ELP), Vivint Smart Home, Inc. (NYSE:VVNT), Alkermes Plc (NASDAQ:ALKS), and Gildan Activewear Inc (NYSE:GIL). All of these stocks' market caps are closest to FHN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TFII,10,67009,-2 VICR,19,81691,5 NRZ,22,121379,-1 ELP,12,39175,5 VVNT,5,5836,-4 ALKS,26,702713,-4 GIL,22,432391,0 Average,16.6,207171,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $384 million in FHN's case. Alkermes Plc (NASDAQ:ALKS) 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. Compared to these stocks First Horizon National Corporation (NYSE:FHN) is more popular among hedge funds. Our overall hedge fund sentiment score for FHN is 89. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately FHN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FHN were disappointed as the stock returned -4.1% since the end of the second 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 10 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.