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Do Hedge Funds Love Healthequity Inc (HQY)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Healthequity Inc (NASDAQ:HQY), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Healthequity Inc (NASDAQ:HQY) undervalued? Prominent investors are getting less bullish. The number of long hedge fund bets decreased by 2 recently. Our calculations also showed that HQY isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

Let’s take a look at the fresh hedge fund action regarding Healthequity Inc (NASDAQ:HQY).

Hedge fund activity in Healthequity Inc (NASDAQ:HQY)

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HQY over the last 13 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

HQY_dec2018

Among these funds, Columbus Circle Investors held the most valuable stake in Healthequity Inc (NASDAQ:HQY), which was worth $15 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $14.9 million worth of shares. Moreover, PEAK6 Capital Management, Royce & Associates, and GLG Partners were also bullish on Healthequity Inc (NASDAQ:HQY), allocating a large percentage of their portfolios to this stock.

Due to the fact that Healthequity Inc (NASDAQ:HQY) has faced falling interest from the smart money, it’s easy to see that there is a sect of money managers who sold off their full holdings heading into Q3. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management dumped the largest stake of all the hedgies followed by Insider Monkey, totaling about $1.2 million in stock. Mike Vranos’s fund, Ellington, also said goodbye to its stock, about $0.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Healthequity Inc (NASDAQ:HQY) but similarly valued. We will take a look at Hexcel Corporation (NYSE:HXL), Six Flags Entertainment Corp (NYSE:SIX), Crane Co. (NYSE:CR), and Foot Locker, Inc. (NYSE:FL). This group of stocks’ market caps resemble HQY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HXL 23 222789 9
SIX 25 733870 9
CR 19 348653 0
FL 26 465132 -4
Average 23.25 442611 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $63 million in HQY’s case. Foot Locker, Inc. (NYSE:FL) is the most popular stock in this table. On the other hand Crane Co. (NYSE:CR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Healthequity Inc (NASDAQ:HQY) is even less popular than CR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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