Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
The St. Joe Company (NYSE:JOE) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. JOE was in 12 hedge funds' portfolios at the end of the second quarter of 2019. There were 13 hedge funds in our database with JOE holdings at the end of the previous quarter. Our calculations also showed that JOE isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the crème de la crème of this club, about 750 funds. These money managers administer most of all hedge funds' total asset base, and by watching their highest performing stock picks, Insider Monkey has deciphered several investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's check out the fresh hedge fund action regarding The St. Joe Company (NYSE:JOE).
What does smart money think about The St. Joe Company (NYSE:JOE)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JOE over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Bruce Berkowitz's Fairholme (FAIRX) has the biggest position in The St. Joe Company (NYSE:JOE), worth close to $458 million, corresponding to 98% of its total 13F portfolio. The second most bullish fund manager is Mario Gabelli of GAMCO Investors, with a $24.7 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism contain Renaissance Technologies, Chuck Royce's Royce & Associates and Thomas E. Claugus's GMT Capital.
Seeing as The St. Joe Company (NYSE:JOE) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of fund managers who were dropping their full holdings heading into Q3. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP cut the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $2.2 million in stock. Noam Gottesman's fund, GLG Partners, also sold off its stock, about $0.3 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as The St. Joe Company (NYSE:JOE) but similarly valued. These stocks are Independence Realty Trust Inc (NYSE:IRT), Encore Capital Group, Inc. (NASDAQ:ECPG), Republic Bancorp, Inc. (NASDAQ:RBCAA), and Cango Inc. (NYSE:CANG). All of these stocks' market caps resemble JOE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IRT,8,65969,-3 ECPG,8,63507,-6 RBCAA,6,17134,-1 CANG,1,414,-1 Average,5.75,36756,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $506 million in JOE's case. Independence Realty Trust Inc (NYSE:IRT) is the most popular stock in this table. On the other hand Cango Inc. (NYSE:CANG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks The St. Joe Company (NYSE:JOE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately JOE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on JOE were disappointed as the stock returned -0.9% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.