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Do Hedge Funds Love Harmonic Inc (HLIT)?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Harmonic Inc (NASDAQ:HLIT) shares have lost 39% since the beginning of the year, but when it comes to the stock’s popularity among the funds we track it was included in 11 hedge funds’ portfolios at the end of the third quarter of 2015 unchanged from a quarter earlier. 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 GasLog Partners LP (NYSE:GLOP), Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), and Tronox Ltd (NYSE:TROX) to gather more data points.

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At the moment there are dozens of methods stock market investors employ to grade stocks. A duo of the most underrated methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best money managers can beat their index-focused peers by a healthy amount (see the details here).

Keeping this in mind, let’s take a peek at the latest action surrounding Harmonic Inc (NASDAQ:HLIT).

What does the smart money think about Harmonic Inc (NASDAQ:HLIT)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Robert G. Moses’s RGM Capital has the number one position in Harmonic Inc (NASDAQ:HLIT), worth close to $35.6 million, accounting for 4.7% of its total 13F portfolio. Coming in second is Royce & Associates, led by Chuck Royce, holding an $13 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’ Renaissance Technologies, and D. E. Shaw’s D E Shaw.

Because Harmonic Inc (NASDAQ:HLIT) has experienced a declining sentiment from the smart money, we can see that there were a few hedgies that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $0.7 million in call options., and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $0.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Harmonic Inc (NASDAQ:HLIT). These stocks are GasLog Partners LP (NYSE:GLOP), Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), Tronox Ltd (NYSE:TROX), and HomeStreet Inc (NASDAQ:HMST). All of these stocks’ market caps are similar to HLIT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLOP 4 17962 -3
NGVC 7 13775 2
TROX 12 50093 -5
HMST 12 17257 -1

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $25 million, lower than the $59 million in HLIT’s case. Tronox Ltd (NYSE:TROX) and HomeStreet Inc (NASDAQ:HMST) are the most popular stocks in this table. On the other hand, GasLog Partners LP (NYSE:GLOP) is the least popular one with only 4 bullish hedge fund positions. Harmonic Inc (NASDAQ:HLIT) 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. In this regard TROX and HMST might be better candidates to consider for a long position.

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