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Is HHC A Good Stock To Buy According To Hedge Funds?

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In this article we are going to use hedge fund sentiment as a tool and determine whether The Howard Hughes Corporation (NYSE:HHC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is HHC a good stock to buy? The Howard Hughes Corporation (NYSE:HHC) investors should pay attention to an increase in hedge fund sentiment recently. The Howard Hughes Corporation (NYSE:HHC) was in 31 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 33. There were 28 hedge funds in our database with HHC holdings at the end of June. Our calculations also showed that HHC isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bill Ackman of Pershing Square

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a gander at the recent hedge fund action regarding The Howard Hughes Corporation (NYSE:HHC).

Do Hedge Funds Think HHC Is A Good Stock To Buy Now?

At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2020. By comparison, 26 hedge funds held shares or bullish call options in HHC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Bill Ackman's Pershing Square has the biggest position in The Howard Hughes Corporation (NYSE:HHC), worth close to $628.9 million, amounting to 7.1% of its total 13F portfolio. Coming in second is Horizon Asset Management, managed by Murray Stahl, which holds a $54.8 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of Amy Minella's Cardinal Capital, Mubadala Investment's MIC Capital Partners and Matthew Mark's Jet Capital Investors. In terms of the portfolio weights assigned to each position MIC Capital Partners allocated the biggest weight to The Howard Hughes Corporation (NYSE:HHC), around 9.51% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, dishing out 7.13 percent of its 13F equity portfolio to HHC.

As industrywide interest jumped, key hedge funds have been driving this bullishness. HG Vora Capital Management, managed by Parag Vora, established the most valuable position in The Howard Hughes Corporation (NYSE:HHC). HG Vora Capital Management had $17.3 million invested in the company at the end of the quarter. Morris Mark's Mark Asset Management also made a $5 million investment in the stock during the quarter. The other funds with brand new HHC positions are Peter Algert's Algert Global, Mika Toikka's AlphaCrest Capital Management, and David Andre and Astro Teller's Cerebellum Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as The Howard Hughes Corporation (NYSE:HHC) but similarly valued. These stocks are PTC Therapeutics, Inc. (NASDAQ:PTCT), Balchem Corporation (NASDAQ:BCPC), Verint Systems Inc. (NASDAQ:VRNT), AAON, Inc. (NASDAQ:AAON), Harmony Gold Mining Company Limited (NYSE:HMY), H&R Block, Inc. (NYSE:HRB), and Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). This group of stocks' market valuations are closest to HHC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTCT,25,209866,-6 BCPC,16,76494,-1 VRNT,27,428732,2 AAON,16,51732,1 HMY,10,57330,0 HRB,24,342325,0 AJRD,26,462985,1 Average,20.6,232781,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $233 million. That figure was $858 million in HHC's case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand Harmony Gold Mining Company Limited (NYSE:HMY) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks The Howard Hughes Corporation (NYSE:HHC) is more popular among hedge funds. Our overall hedge fund sentiment score for HHC is 86.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on HHC as the stock returned 40.9% since the end of September (through 12/18) 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.

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Disclosure: None. This article was originally published at Insider Monkey.

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