It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. 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 FRP Holdings Inc (NASDAQ:FRPH).
FRP Holdings Inc (NASDAQ:FRPH) was in 8 hedge funds' portfolios at the end of the third quarter of 2019. FRPH investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 7 hedge funds in our database with FRPH holdings at the end of the previous quarter. Our calculations also showed that FRPH 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 the eyes of most shareholders, hedge funds are assumed to be unimportant, old financial tools of the past. While there are over 8000 funds with their doors open at the moment, We choose to focus on the upper echelon of this group, around 750 funds. Most estimates calculate that this group of people manage most of the smart money's total capital, and by paying attention to their top picks, Insider Monkey has discovered various investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_758450" align="aligncenter" width="450"] Martin Whitman of Third Avenue Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the recent hedge fund action surrounding FRP Holdings Inc (NASDAQ:FRPH).
What does smart money think about FRP Holdings Inc (NASDAQ:FRPH)?
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in FRPH 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.
Among these funds, Royce & Associates held the most valuable stake in FRP Holdings Inc (NASDAQ:FRPH), which was worth $22.7 million at the end of the third quarter. On the second spot was Third Avenue Management which amassed $6.3 million worth of shares. Intrepid Capital Management, Sprott Asset Management, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Intrepid Capital Management allocated the biggest weight to FRP Holdings Inc (NASDAQ:FRPH), around 2.61% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to FRPH.
As industrywide interest jumped, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the biggest position in FRP Holdings Inc (NASDAQ:FRPH). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks similar to FRP Holdings Inc (NASDAQ:FRPH). These stocks are Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), American Vanguard Corp. (NYSE:AVD), NRC Group Holdings Corp. (NYSE:NRCG), and Napco Security Technologies Inc (NASDAQ:NSSC). This group of stocks' market caps are closest to FRPH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DHIL,15,46453,1 AVD,8,27502,-3 NRCG,13,17546,5 NSSC,11,22143,6 Average,11.75,28411,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $39 million in FRPH's case. Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) is the most popular stock in this table. On the other hand American Vanguard Corp. (NYSE:AVD) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks FRP Holdings Inc (NASDAQ:FRPH) is even less popular than AVD. Hedge funds dodged a bullet by taking a bearish stance towards FRPH. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FRPH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FRPH investors were disappointed as the stock returned 3.9% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.