Is H&E Equipment Services, Inc. (HEES) A Good Stock To Buy?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

H&E Equipment Services, Inc. (NASDAQ:HEES) has seen an increase in activity from the world’s largest hedge funds lately. 14 hedge funds that we track were long the stock on September 30. There were 11 hedge funds in our database with HEES holdings 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 Inovio Pharmaceuticals Inc (NYSEAMEX:INO), EarthLink, Inc. (NASDAQ:ELNK), and Nimble Storage Inc (NYSE:NMBL) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading H&E Equipment Services, Inc. (NASDAQ:HEES)?

Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a 27% jump from the second quarter of 2016. By comparison, 9 hedge funds held shares or bullish call options in HEES heading into this year, so we’ve seen a greater than 50% surge in the ownership of the stock this year among successful hedge funds. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the most valuable position in H&E Equipment Services, Inc. (NASDAQ:HEES), worth close to $6.2 million. The second most bullish fund manager is Weatherbie Capital, led by Matthew A. Weatherbie, which holds a $5.6 million position. Some other professional money managers with similar optimism consist of David Keidan’s Buckingham Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Israel Englander’s Millennium Management. 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.

As industry-wide interest jumped, some big names were breaking ground themselves. Adage Capital Management initiated the most outsized position in H&E Equipment Services, Inc. (NASDAQ:HEES). Michael Platt and William Reeves’ BlueCrest Capital Mgmt. also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new HEES investors: David E. Shaw’s D E Shaw and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s now review hedge fund activity in other stocks similar to H&E Equipment Services, Inc. (NASDAQ:HEES). We will take a look at Inovio Pharmaceuticals Inc (NYSEAMEX:INO), EarthLink, Inc. (NASDAQ:ELNK), Nimble Storage Inc (NYSE:NMBL), and New York Mortgage Trust, Inc. (NASDAQ:NYMT). All of these stocks’ market caps are closest to HEES’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $31 million in HEES’s case. EarthLink, Inc. (NASDAQ:ELNK) is the most popular stock in this table. On the other hand New York Mortgage Trust, Inc. (NASDAQ:NYMT) is the least popular one with only 3 bullish hedge fund positions. H&E Equipment Services, Inc. (NASDAQ:HEES) 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 lately. In this regard NMBL might be a better candidate to consider taking a long position in, though HEES is worth watching as more and more hedge funds buy in.

Disclosure: None