Heartland Financial USA Inc (HTLF): Are Hedge Funds Right About This Stock?

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 Carl Icahn and George Soros 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 successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Heartland Financial USA Inc (NASDAQ:HTLF) .

Is Heartland Financial USA Inc (NASDAQ:HTLF) a good investment now? The best stock pickers are definitely becoming less confident. The number of long hedge fund investments shrunk by 3 recently. HTLF was in 8 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with HTLF positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Universal Insurance Holdings, Inc. (NYSEAMEX:UVE), Archrock Partners LP (NASDAQ:APLP), and New Mountain Finance Corp. (NYSE:NMFC) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

With all of this in mind, we’re going to take a look at the fresh action surrounding Heartland Financial USA Inc (NASDAQ:HTLF).

What does the smart money think about Heartland Financial USA Inc (NASDAQ:HTLF)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, down 27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTLF over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the 10 largest hedge funds in the world, has the most valuable position in Heartland Financial USA Inc (NASDAQ:HTLF), worth close to $5 million, comprising less than 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Israel Englander’s Millennium Management holding a $3.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain Cliff Asness’s AQR Capital Management, Roger Ibbotson’s Zebra Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that Heartland Financial USA Inc (NASDAQ:HTLF) has sustained bearish sentiment from the smart money, it’s safe to say that there were a few hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that David E. Shaw’s D E Shaw sold off the largest position of the 700 funds studied by Insider Monkey, comprising close to $0.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $0.5 million worth of HTLF shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Heartland Financial USA Inc (NASDAQ:HTLF) but similarly valued. These stocks are Universal Insurance Holdings, Inc. (NYSEAMEX:UVE), Archrock Partners LP (NASDAQ:APLP), New Mountain Finance Corp. (NYSE:NMFC), and Hibbett Sports, Inc. (NASDAQ:HIBB). This group of stocks’ market caps resemble HTLF’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $14 million in HTLF’s case. Universal Insurance Holdings, Inc. (NYSEAMEX:UVE) is the most popular stock in this table. On the other hand Archrock Partners LP (NASDAQ:APLP) is the least popular one with only 6 bullish hedge fund positions. Heartland Financial USA Inc (NASDAQ:HTLF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard UVE might be a better candidate to consider taking a long position in.

Disclosure: none.