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Were Hedge Funds Right About Fly Leasing Ltd (FLY)?

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Fly Leasing Ltd (NYSE:FLY).

Fly Leasing Ltd (NYSE:FLY) has seen an increase in activity from the world's largest hedge funds lately. Fly Leasing Ltd (NYSE:FLY) was in 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that FLY isn't among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Billionaire Steve Cohen's Top 10 stock picks
Billionaire Steve Cohen's Top 10 stock picks

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we're going to take a gander at the fresh hedge fund action encompassing Fly Leasing Ltd (NYSE:FLY).

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

At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in FLY over the last 23 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is FLY A Good Stock To Buy?
Is FLY A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Israel Englander's Millennium Management has the number one position in Fly Leasing Ltd (NYSE:FLY), worth close to $21.3 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Alpine Associates, led by Robert Emil Zoellner, holding a $12.7 million position; 0.3% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Jon Bauer's Contrarian Capital, Matthew Halbower's Pentwater Capital Management and John Orrico's Water Island Capital. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Fly Leasing Ltd (NYSE:FLY), around 1.28% of its 13F portfolio. Berry Street Capital is also relatively very bullish on the stock, setting aside 0.37 percent of its 13F equity portfolio to FLY.

With a general bullishness amongst the heavyweights, some big names have jumped into Fly Leasing Ltd (NYSE:FLY) headfirst. Alpine Associates, managed by Robert Emil Zoellner, created the biggest position in Fly Leasing Ltd (NYSE: FLY). Alpine Associates had $12.7 million invested in the company at the end of the quarter. Jon Bauer's Contrarian Capital also initiated a $6.1 million position during the quarter. The other funds with brand new FLY positions are Matthew Halbower's Pentwater Capital Management, John Orrico's Water Island Capital, and Noam Gottesman's GLG Partners.

Let's also examine hedge fund activity in other stocks similar to Fly Leasing Ltd (NYSE:FLY). We will take a look at Waterstone Financial, Inc. (NASDAQ:WSBF), Sierra Metals Inc. (NYSE:SMTS), GreenPower Motor Company Inc. (NASDAQ:GP), Global Ship Lease, Inc. (NYSE:GSL), W&T Offshore, Inc. (NYSE:WTI), Kandi Technolgies Group Inc. (NASDAQ:KNDI), and Tidewater Inc. (NYSE:TDW). This group of stocks' market valuations resemble FLY's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSBF,10,77054,-2 SMTS,8,12731,4 GP,4,2317,0 GSL,11,48076,9 WTI,13,24610,2 KNDI,8,10637,0 TDW,9,77695,0 Average,9,36160,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $79 million in FLY's case. W&T Offshore, Inc. (NYSE:WTI) is the most popular stock in this table. On the other hand GreenPower Motor Company Inc. (NASDAQ:GP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Fly Leasing Ltd (NYSE:FLY) is more popular among hedge funds. Our overall hedge fund sentiment score for FLY is 90. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately FLY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FLY were disappointed as the stock returned 0.9% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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