Out of thousands of stocks that are currently traded on the market, it might be really difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs/PhDs, industry experts, and they are well connected to get tips from insiders. Individual investors can piggyback hedge funds and may be able to benefit from their vast resources. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about H&R Block, Inc. (NYSE:HRB).
H&R Block, Inc. (NYSE:HRB) was in 44 hedge funds’ portfolios at the end of September. H&R Block, Inc. (NYSE:HRB) investors should pay attention to a decrease in enthusiasm from smart money recently. There were 44 hedge funds in our database with HRB 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 CGI Group Inc (USA) (NYSE:GIB), Autodesk, Inc. (NASDAQ:ADSK), and Philippine Long Distance Telephone (ADR) (NYSE:PHI) to gather more data points.
In the eyes of most investors, hedge funds are assumed to be worthless, outdated financial tools of the past. While there are greater than 8000 funds trading at present, our researchers look at the masters of this club, around 700 funds. Most estimates calculate that this group of people preside over bulk of all hedge funds’ total capital, and by paying attention to their unrivaled equity investments, Insider Monkey has revealed many investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, let’s review the latest action surrounding H&R Block, Inc. (NYSE:HRB).
What does the smart money think about H&R Block, Inc. (NYSE:HRB)?
At the end of Q3, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, flat over the last quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Robert Pohly’s Samlyn Capital has the largest position in H&R Block, Inc. (NYSE:HRB), worth close to $107.3 million, corresponding to 2% of its total 13F portfolio. The second most bullish fund manager is Daniel Lewis of Orange Capital, with an $105.4 million position; the fund has 8.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise Israel Englander’s Millennium Management, David Harding’s Winton Capital Management and Cliff Asness’ AQR Capital Management.
Since H&R Block, Inc. (NYSE:HRB) has witnessed bearish sentiment from the smart money, logic holds that there were a few fund managers that decided to sell off their positions entirely last quarter. Intriguingly, David Goel and Paul Ferri’s Matrix Capital Management said goodbye to the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $106.7 million in call options.. Orange Capital also sold off its call options, about $101.4 million worth. These transactions are intriguing to say the least, 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 H&R Block, Inc. (NYSE:HRB) but similarly valued. These stocks are CGI Group Inc. (USA) (NYSE:GIB), Autodesk, Inc. (NASDAQ:ADSK), Philippine Long Distance Telephone (ADR) (NYSE:PHI), and Tiffany & Co. (NYSE:TIF). This group of stock market valuations matches HRB’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $665 million, which is below the $1.09 billion that hedge funds had invested in H&R Block, Inc. (NYSE:HRB) at the end of September. H&R Block, Inc. (NYSE:HRB) is also the most popular stock in this group, which could suggest that the stock might be gaining ground in the near future and deserves more attention.