Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Ladder Capital Corp (NYSE:LADR).
Is Ladder Capital Corp (NYSE:LADR) going to take off soon? Money managers are becoming more confident. The number of bullish hedge fund positions inched up by 1 in recent months. Our calculations also showed that ladr isn't among the 30 most popular stocks among hedge funds. LADR was in 15 hedge funds' portfolios at the end of March. There were 14 hedge funds in our database with LADR positions at the end of the previous quarter.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the key hedge fund action encompassing Ladder Capital Corp (NYSE:LADR).
How have hedgies been trading Ladder Capital Corp (NYSE:LADR)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LADR over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Ladder Capital Corp (NYSE:LADR), with a stake worth $13.1 million reported as of the end of March. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $8.6 million. D E Shaw, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in Ladder Capital Corp (NYSE:LADR). Balyasny Asset Management had $0.5 million invested in the company at the end of the quarter. Thomas Bailard's Bailard Inc also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus's Driehaus Capital and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ladder Capital Corp (NYSE:LADR) but similarly valued. We will take a look at Cision Ltd. (NYSE:CISN), Upwork Inc. (NASDAQ:UPWK), Groupon Inc (NASDAQ:GRPN), and Avanos Medical, Inc. (NYSE:AVNS). This group of stocks' market valuations are closest to LADR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CISN,17,51296,0 UPWK,9,10600,2 GRPN,26,405688,2 AVNS,11,40801,-3 Average,15.75,127096,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $54 million in LADR's case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Upwork Inc. (NASDAQ:UPWK) is the least popular one with only 9 bullish hedge fund positions. Ladder Capital Corp (NYSE:LADR) is not the least popular stock in this group but hedge fund interest is still below average. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately LADR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LADR investors were disappointed as the stock returned 0.7% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.