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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Ladder Capital Corp (NYSE:LADR) makes for a good investment right now.
Is LADR a good stock to buy now? Ladder Capital Corp (NYSE:LADR) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of the third quarter of 2020. Our calculations also showed that LADR 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). At the end of this article we will also compare LADR to other stocks including Forestar Group Inc. (NYSE:FOR), Arcos Dorados Holding Inc (NYSE:ARCO), and NextGen Healthcare, Inc. (NASDAQ:NXGN) to get a better sense of its popularity.
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.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to view the fresh hedge fund action surrounding Ladder Capital Corp (NYSE:LADR).
Do Hedge Funds Think LADR Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LADR over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ladder Capital Corp (NYSE:LADR) was held by Balyasny Asset Management, which reported holding $9.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $3.2 million position. Other investors bullish on the company included Millennium Management, Marathon Asset Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Marathon Asset Management allocated the biggest weight to Ladder Capital Corp (NYSE:LADR), around 0.93% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to LADR.
Judging by the fact that Ladder Capital Corp (NYSE:LADR) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few funds that slashed their entire stakes in the third quarter. Intriguingly, David Harding's Winton Capital Management dumped the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $3.1 million in stock. Cliff Asness's fund, AQR Capital Management, also dumped its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Ladder Capital Corp (NYSE:LADR) but similarly valued. These stocks are Forestar Group Inc. (NYSE:FOR), Arcos Dorados Holding Inc (NYSE:ARCO), NextGen Healthcare, Inc. (NASDAQ:NXGN), Tompkins Financial Corporation (NYSE:TMP), Kaiser Aluminum Corp. (NASDAQ:KALU), Krystal Biotech, Inc. (NASDAQ:KRYS), and Lantheus Holdings Inc (NASDAQ:LNTH). This group of stocks' market valuations resemble LADR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FOR,11,102043,-3 ARCO,12,39048,-3 NXGN,16,28532,-1 TMP,7,9977,3 KALU,16,55745,0 KRYS,10,196697,-3 LNTH,16,150006,-4 Average,12.6,83150,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $25 million in LADR's case. NextGen Healthcare, Inc. (NASDAQ:NXGN) is the most popular stock in this table. On the other hand Tompkins Financial Corporation (NYSE:TMP) is the least popular one with only 7 bullish hedge fund positions. Ladder Capital Corp (NYSE:LADR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LADR is 60.7. 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 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on LADR as the stock returned 36% since the end of Q3 (through 12/8) 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.