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Did Hedge Funds Drop The Ball On H&R Block, Inc. (HRB) ?

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Is H&R Block, Inc. (NYSE:HRB) going to take off soon? Hedge funds are taking a bearish view. The number of long hedge fund bets were trimmed by 2 recently. Our calculations also showed that hrb isn’t among the 30 most popular stocks among hedge funds. HRB was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with HRB positions at the end of the previous quarter.

To the average investor there are numerous methods market participants put to use to value publicly traded companies. A pair of the less utilized methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best investment managers can outpace the S&P 500 by a significant amount (see the details here).

Mario Gabelli

Let’s take a peek at the fresh hedge fund action regarding H&R Block, Inc. (NYSE:HRB).

What have hedge funds been doing with H&R Block, Inc. (NYSE:HRB)?

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HRB over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with HRB Positions

Among these funds, AQR Capital Management held the most valuable stake in H&R Block, Inc. (NYSE:HRB), which was worth $73.3 million at the end of the first quarter. On the second spot was GLG Partners which amassed $54.9 million worth of shares. Moreover, D E Shaw, Citadel Investment Group, and GAMCO Investors were also bullish on H&R Block, Inc. (NYSE:HRB), allocating a large percentage of their portfolios to this stock.

Seeing as H&R Block, Inc. (NYSE:HRB) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there were a few fund managers that decided to sell off their full holdings heading into Q3. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $9 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund sold off about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q3.

Let’s check out 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 Curtiss-Wright Corp. (NYSE:CW), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), NewMarket Corporation (NYSE:NEU), and Highwoods Properties Inc (NYSE:HIW). This group of stocks’ market valuations resemble HRB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CW 21 429271 1
ASR 8 35587 3
NEU 21 88478 5
HIW 14 177459 -3
Average 16 182699 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $238 million in HRB’s case. Curtiss-Wright Corp. (NYSE:CW) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 8 bullish hedge fund positions. H&R Block, Inc. (NYSE:HRB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on HRB as the stock returned 19.5% during the same time frame and outperformed the market by an even larger margin.

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

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