The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Five Star Senior Living Inc. (NYSE:FVE)?
Five Star Senior Living Inc. (NYSE:FVE) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that FVE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 58 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's review the new hedge fund action regarding Five Star Senior Living Inc. (NYSE:FVE).
How have hedgies been trading Five Star Senior Living Inc. (NYSE:FVE)?
At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 250% from the fourth quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in FVE a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, V3 Capital held the most valuable stake in Five Star Senior Living Inc. (NYSE:FVE), which was worth $4.3 million at the end of the third quarter. On the second spot was Madison Avenue Partners which amassed $3.8 million worth of shares. Newtyn Management, Renaissance Technologies, and Millennium Management 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 Madison Avenue Partners allocated the biggest weight to Five Star Senior Living Inc. (NYSE:FVE), around 1.86% of its 13F portfolio. V3 Capital is also relatively very bullish on the stock, designating 0.94 percent of its 13F equity portfolio to FVE.
As industrywide interest jumped, key hedge funds have jumped into Five Star Senior Living Inc. (NYSE:FVE) headfirst. V3 Capital, managed by Charles Fitzgerald, established the most valuable position in Five Star Senior Living Inc. (NYSE:FVE). V3 Capital had $4.3 million invested in the company at the end of the quarter. Eli Samaha's Madison Avenue Partners also made a $3.8 million investment in the stock during the quarter. The following funds were also among the new FVE investors: Noah Levy and Eugene Dozortsev's Newtyn Management, Israel Englander's Millennium Management, and Jay Petschek and Steven Major's Corsair Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Five Star Senior Living Inc. (NYSE:FVE). We will take a look at DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), Champions Oncology, Inc. (NASDAQ:CSBR), Daseke, Inc. (NASDAQ:DSKE), and Salisbury Bancorp, Inc. (NASDAQ:SAL). All of these stocks' market caps match FVE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DZSI,5,2817,-1 CSBR,1,1310,0 DSKE,5,1590,-2 SAL,1,2040,-1 Average,3,1939,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $12 million in FVE's case. DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) is the most popular stock in this table. On the other hand Champions Oncology, Inc. (NASDAQ:CSBR) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Five Star Senior Living Inc. (NYSE:FVE) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on FVE as the stock returned 39.6% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.