Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards First Hawaiian, Inc. (NASDAQ:FHB) changed during the first quarter.
First Hawaiian, Inc. (NASDAQ:FHB) was in 18 hedge funds' portfolios at the end of the third quarter of 2019. FHB investors should pay attention to a decrease in hedge fund interest lately. There were 21 hedge funds in our database with FHB holdings at the end of the previous quarter. Our calculations also showed that FHB 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.
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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/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. We're going to take a look at the new hedge fund action encompassing First Hawaiian, Inc. (NASDAQ:FHB).
What have hedge funds been doing with First Hawaiian, Inc. (NASDAQ:FHB)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FHB over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of First Hawaiian, Inc. (NASDAQ:FHB), with a stake worth $52 million reported as of the end of September. Trailing Citadel Investment Group was AQR Capital Management, which amassed a stake valued at $38 million. D E Shaw, Arrowstreet Capital, and Two Sigma Advisors 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 BlueMar Capital Management allocated the biggest weight to First Hawaiian, Inc. (NASDAQ:FHB), around 4.18% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.3 percent of its 13F equity portfolio to FHB.
Judging by the fact that First Hawaiian, Inc. (NASDAQ:FHB) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedgies that elected to cut their full holdings by the end of the third quarter. Interestingly, Brandon Haley's Holocene Advisors said goodbye to the biggest position of the "upper crust" of funds watched by Insider Monkey, totaling close to $9 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace, also said goodbye to its stock, about $3.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as First Hawaiian, Inc. (NASDAQ:FHB) but similarly valued. We will take a look at Plains GP Holdings LP (NYSE:PAGP), Ingevity Corporation (NYSE:NGVT), GW Pharmaceuticals plc (NASDAQ:GWPH), and Teradata Corporation (NYSE:TDC). This group of stocks' market values are closest to FHB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PAGP,18,216040,1 NGVT,20,144120,-1 GWPH,29,508771,13 TDC,20,247413,-2 Average,21.75,279086,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $209 million in FHB's case. GW Pharmaceuticals plc (NASDAQ:GWPH) is the most popular stock in this table. On the other hand Plains GP Holdings LP (NYSE:PAGP) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks First Hawaiian, Inc. (NASDAQ:FHB) is even less popular than PAGP. 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. A small number of hedge funds were also right about betting on FHB, though not to the same extent, as the stock returned 7.9% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.