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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The Howard Hughes Corporation (NYSE:HHC).
Is HHC stock a buy? The Howard Hughes Corporation (NYSE:HHC) shareholders have witnessed a decrease in hedge fund sentiment in recent months. The Howard Hughes Corporation (NYSE:HHC) was in 27 hedge funds' portfolios at the end of December. The all time high for this statistic is 33. There were 31 hedge funds in our database with HHC positions at the end of the third quarter. Our calculations also showed that HHC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to check out the latest hedge fund action encompassing The Howard Hughes Corporation (NYSE:HHC).
Do Hedge Funds Think HHC Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the third quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in HHC a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Pershing Square held the most valuable stake in The Howard Hughes Corporation (NYSE:HHC), which was worth $861.8 million at the end of the fourth quarter. On the second spot was Cardinal Capital which amassed $75.4 million worth of shares. Horizon Asset Management, MIC Capital Partners, and Fir Tree 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 MIC Capital Partners allocated the biggest weight to The Howard Hughes Corporation (NYSE:HHC), around 11.67% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, earmarking 8.62 percent of its 13F equity portfolio to HHC.
Because The Howard Hughes Corporation (NYSE:HHC) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who sold off their positions entirely heading into Q1. Intriguingly, D. E. Shaw's D E Shaw sold off the biggest position of the 750 funds monitored by Insider Monkey, valued at close to $3.1 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund sold off about $2.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds heading into Q1.
Let's now take a look at 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 Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), SL Green Realty Corp (NYSE:SLG), frontdoor, inc. (NASDAQ:FTDR), Premier Inc (NASDAQ:PINC), Alcoa Corporation (NYSE:AA), ChemoCentryx Inc (NASDAQ:CCXI), and Altair Engineering Inc. (NASDAQ:ALTR). This group of stocks' market values resemble HHC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APLS,35,1023890,6 SLG,22,214817,-1 FTDR,37,904189,-1 PINC,17,169751,7 AA,33,780886,0 CCXI,23,616651,-4 ALTR,16,530704,2 Average,26.1,605841,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $1192 million in HHC's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Altair Engineering Inc. (NASDAQ:ALTR) is the least popular one with only 16 bullish hedge fund positions. The Howard Hughes Corporation (NYSE:HHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HHC is 51.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on HHC as the stock returned 34.5% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.