There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze SFL Corporation Ltd. (NYSE:SFL).
Is SFL Corporation Ltd. (NYSE:SFL) the right pick for your portfolio? Prominent investors are taking a bullish view. The number of long hedge fund bets inched up by 5 recently. Our calculations also showed that SFL isn't among the 30 most popular stocks among hedge funds (see the video below). SFL was in 11 hedge funds' portfolios at the end of June. There were 6 hedge funds in our database with SFL positions at the end of the previous quarter. Video: Click the image to 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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 take a glance at the new hedge fund action surrounding SFL Corporation Ltd. (NYSE:SFL).
What have hedge funds been doing with SFL Corporation Ltd. (NYSE:SFL)?
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 83% from the first quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in SFL a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in SFL Corporation Ltd. (NYSE:SFL), which was worth $9.8 million at the end of the second quarter. On the second spot was Millennium Management which amassed $9 million worth of shares. Moreover, Carlson Capital, GLG Partners, and Renaissance Technologies were also bullish on SFL Corporation Ltd. (NYSE:SFL), allocating a large percentage of their portfolios to this stock.
Consequently, key hedge funds were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the largest position in SFL Corporation Ltd. (NYSE:SFL). Balyasny Asset Management had $0.7 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Israel Englander's Millennium Management, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks similar to SFL Corporation Ltd. (NYSE:SFL). We will take a look at The Children's Place Inc. (NASDAQ:PLCE), Tootsie Roll Industries, Inc. (NYSE:TR), Heartland Express, Inc. (NASDAQ:HTLD), and Edgewell Personal Care Company (NYSE:EPC). This group of stocks' market caps resemble SFL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLCE,19,254998,-3 TR,13,93488,-3 HTLD,13,29892,-1 EPC,25,215610,6 Average,17.5,148497,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $36 million in SFL's case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Tootsie Roll Industries, Inc. (NYSE:TR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks SFL Corporation Ltd. (NYSE:SFL) is even less popular than TR. Hedge funds clearly dropped the ball on SFL as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on SFL as the stock returned 15% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.