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Did Hedge Funds Drop The Ball On At Home Group Inc. (HOME) ?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is At Home Group Inc. (NYSE:HOME) a healthy stock for your portfolio? Money managers are getting less optimistic. The number of bullish hedge fund bets were cut by 17 lately. Our calculations also showed that HOME isn’t among the 30 most popular stocks among hedge funds (see the video below). HOME was in 15 hedge funds’ portfolios at the end of June. There were 32 hedge funds in our database with HOME holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

HOME_oct2019

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 view the key hedge fund action regarding At Home Group Inc. (NYSE:HOME).

Hedge fund activity in At Home Group Inc. (NYSE:HOME)

Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -53% from the first quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in HOME a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Paul Marshall Marshall Wace

According to Insider Monkey’s hedge fund database, Dmitry Balyasny’s Balyasny Asset Management has the biggest position in At Home Group Inc. (NYSE:HOME), worth close to $14.4 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Private Capital Management, managed by Gregg J. Powers, which holds a $10.1 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish contain Paul Marshall and Ian Wace’s Marshall Wace LLP, Israel Englander’s Millennium Management and Dmitry Balyasny’s Balyasny Asset Management.

Seeing as At Home Group Inc. (NYSE:HOME) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of funds that decided to sell off their entire stakes in the second quarter. At the top of the heap, Mariko Gordon’s Daruma Asset Management sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $27.1 million in stock, and John Lykouretzos’s Hoplite Capital Management was right behind this move, as the fund dropped about $22.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 17 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to At Home Group Inc. (NYSE:HOME). We will take a look at AudioCodes Ltd. (NASDAQ:AUDC), Prevail Therapeutics Inc. (NASDAQ:PRVL), BBX Capital Corporation (NYSE:BBX), and CONSOL Coal Resources LP (NYSE:CCR). This group of stocks’ market caps resemble HOME’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUDC 11 18594 -3
PRVL 11 292984 11
BBX 15 35360 -1
CCR 4 96102 -1
Average 10.25 110760 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $67 million in HOME’s case. BBX Capital Corporation (NYSE:BBX) is the most popular stock in this table. On the other hand CONSOL Coal Resources LP (NYSE:CCR) is the least popular one with only 4 bullish hedge fund positions. At Home Group Inc. (NYSE:HOME) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on HOME as the stock returned 44.4% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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