In this article we will check out the progression of hedge fund sentiment towards The Howard Hughes Corporation (NYSE:HHC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
The Howard Hughes Corporation (NYSE:HHC) was in 24 hedge funds' portfolios at the end of the first quarter of 2020. HHC has experienced a decrease in activity from the world's largest hedge funds in recent months. There were 25 hedge funds in our database with HHC holdings at the end of the previous quarter. Our calculations also showed that HHC 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.
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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_607931" align="aligncenter" width="399"] Bill Ackman of Pershing Square[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Now let's check out the recent hedge fund action surrounding The Howard Hughes Corporation (NYSE:HHC).
How have hedgies been trading The Howard Hughes Corporation (NYSE:HHC)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HHC over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (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 $616.2 million at the end of the third quarter. On the second spot was Horizon Asset Management which amassed $69.7 million worth of shares. Cardinal Capital, Rima Senvest Management, and MIC Capital Partners 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 Pershing Square allocated the biggest weight to The Howard Hughes Corporation (NYSE:HHC), around 9.37% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, setting aside 4.86 percent of its 13F equity portfolio to HHC.
Due to the fact that The Howard Hughes Corporation (NYSE:HHC) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there were a few hedgies that slashed their positions entirely by the end of the first quarter. Intriguingly, Matthew Halbower's Pentwater Capital Management dropped the largest position of the "upper crust" of funds followed by Insider Monkey, worth about $19.7 million in stock. Martin Whitman's fund, Third Avenue Management, also cut its stock, about $14.3 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Howard Hughes Corporation (NYSE:HHC) but similarly valued. We will take a look at MGIC Investment Corporation (NYSE:MTG), Bank OZK (NASDAQ:OZK), First Hawaiian, Inc. (NASDAQ:FHB), and Gates Industrial Corporation plc (NYSE:GTES). All of these stocks' market caps are closest to HHC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTG,41,268781,4 OZK,25,146154,0 FHB,21,136967,3 GTES,8,23102,-1 Average,23.75,143751,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $792 million in HHC's case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 8 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately HHC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on HHC were disappointed as the stock returned 19.7% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.