Did Hedge Funds Make The Right Call On Hill-Rom Holdings, Inc. (HRC) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Hill-Rom Holdings, Inc. (NYSE:HRC) based on that data and determine whether they were really smart about the stock.

Is Hill-Rom Holdings, Inc. (NYSE:HRC) a buy here? Prominent investors were in an optimistic mood. The number of long hedge fund bets went up by 3 lately. Our calculations also showed that HRC 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we’re going to take a look at the recent hedge fund action encompassing Hill-Rom Holdings, Inc. (NYSE:HRC).

Hedge fund activity in Hill-Rom Holdings, Inc. (NYSE:HRC)

At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in HRC a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is HRC A Good Stock To Buy?

More specifically, Select Equity Group was the largest shareholder of Hill-Rom Holdings, Inc. (NYSE:HRC), with a stake worth $389.2 million reported as of the end of September. Trailing Select Equity Group was Fisher Asset Management, which amassed a stake valued at $86.9 million. Millennium Management, Polar Capital, and AQR Capital Management 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 Select Equity Group allocated the biggest weight to Hill-Rom Holdings, Inc. (NYSE:HRC), around 2.68% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, designating 2.26 percent of its 13F equity portfolio to HRC.

As aggregate interest increased, key money managers have been driving this bullishness. Bridger Management, managed by Roberto Mignone, created the largest position in Hill-Rom Holdings, Inc. (NYSE:HRC). Bridger Management had $19.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $16 million position during the quarter. The following funds were also among the new HRC investors: Michael Rockefeller and KarláKroeker’s Woodline Partners, George McCabe’s Portolan Capital Management, and Brad Farber’s Atika Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hill-Rom Holdings, Inc. (NYSE:HRC) but similarly valued. These stocks are NovoCure Limited (NASDAQ:NVCR), Royal Caribbean Cruises Ltd. (NYSE:RCL), Equitable Holdings, Inc. (NYSE:EQH), and Dynatrace, Inc. (NYSE:DT). This group of stocks’ market valuations resemble HRC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVCR 27 371639 5
RCL 25 405608 -18
EQH 27 821993 -6
DT 35 725860 10
Average 28.5 581275 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $581 million. That figure was $738 million in HRC’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand Royal Caribbean Cruises Ltd. (NYSE:RCL) is the least popular one with only 25 bullish hedge fund positions. Hill-Rom Holdings, Inc. (NYSE:HRC) 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. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately HRC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HRC were disappointed as the stock returned 9.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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