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Did Hedge Funds Make The Right Call On Harley-Davidson, Inc. (HOG)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Harley-Davidson, Inc. (NYSE:HOG) and determine whether the smart money was really smart about this stock.

Is Harley-Davidson, Inc. (NYSE:HOG) the right pick for your portfolio? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund positions went down by 2 recently. Our calculations also showed that HOG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are several gauges stock traders employ to analyze their stock investments. A couple of the best gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outperform the S&P 500 by a solid margin (see the details here).

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to review the latest hedge fund action surrounding Harley-Davidson, Inc. (NYSE:HOG).

What does smart money think about Harley-Davidson, Inc. (NYSE:HOG)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HOG over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is HOG A Good Stock To Buy?

More specifically, Impala Asset Management was the largest shareholder of Harley-Davidson, Inc. (NYSE:HOG), with a stake worth $50.2 million reported as of the end of September. Trailing Impala Asset Management was Impala Asset Management, which amassed a stake valued at $11 million. Millennium Management, GMT Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Impala Asset Management allocated the biggest weight to Harley-Davidson, Inc. (NYSE:HOG), around 6.76% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to HOG.

Seeing as Harley-Davidson, Inc. (NYSE:HOG) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their full holdings last quarter. At the top of the heap, Joel Greenblatt’s Gotham Asset Management dumped the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $3.5 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund said goodbye to about $1.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Harley-Davidson, Inc. (NYSE:HOG) but similarly valued. We will take a look at Carter’s, Inc. (NYSE:CRI), Descartes Systems Group (NASDAQ:DSGX), NeoGenomics, Inc. (NASDAQ:NEO), and Virgin Galactic Holdings, Inc. (NYSE:SPCE). This group of stocks’ market valuations resemble HOG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRI 23 149581 2
DSGX 10 103626 -2
NEO 11 51026 -1
SPCE 12 55139 -20
Average 14 89843 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $88 million in HOG’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Descartes Systems Group (NASDAQ:DSGX) is the least popular one with only 10 bullish hedge fund positions. Harley-Davidson, Inc. (NYSE:HOG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on HOG as the stock returned 54.8% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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