Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Hillenbrand, Inc. (NYSE:HI) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Hillenbrand, Inc. (NYSE:HI) ready to rally soon? Prominent investors are in a bearish mood. The number of long hedge fund bets retreated by 1 lately. Our calculations also showed that HI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the 21st century investor’s toolkit there are a lot of gauges stock market investors have at their disposal to evaluate publicly traded companies. A duo of the less known gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top investment managers can outpace the market by a significant margin (see the details here).
Noam Gottesman of GLG Partners
Keeping this in mind let’s review the latest hedge fund action surrounding Hillenbrand, Inc. (NYSE:HI).
How are hedge funds trading Hillenbrand, Inc. (NYSE:HI)?
Heading into the first quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HI over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Two Sigma Advisors was the largest shareholder of Hillenbrand, Inc. (NYSE:HI), with a stake worth $23.1 million reported as of the end of September. Trailing Two Sigma Advisors was Adage Capital Management, which amassed a stake valued at $20.4 million. Citadel Investment Group, Renaissance Technologies, and GLG Partners 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 Falcon Edge Capital allocated the biggest weight to Hillenbrand, Inc. (NYSE:HI), around 1.06% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, dishing out 0.59 percent of its 13F equity portfolio to HI.
Because Hillenbrand, Inc. (NYSE:HI) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely in the third quarter. Interestingly, Paul Tudor Jones’s Tudor Investment Corp dropped the largest investment of all the hedgies watched by Insider Monkey, totaling close to $4 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dropped about $1.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Hillenbrand, Inc. (NYSE:HI). These stocks are First Majestic Silver Corp (NYSE:AG), California Water Service Group (NYSE:CWT), WESCO International, Inc. (NYSE:WCC), and Dorman Products Inc. (NASDAQ:DORM). This group of stocks’ market values resemble HI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AG | 16 | 84709 | 1 |
| CWT | 20 | 43173 | 3 |
| WCC | 26 | 631182 | 6 |
| DORM | 13 | 54185 | -2 |
| Average | 18.75 | 203312 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $122 million in HI’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand Dorman Products Inc. (NASDAQ:DORM) is the least popular one with only 13 bullish hedge fund positions. Hillenbrand, Inc. (NYSE:HI) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately HI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HI were disappointed as the stock returned -45.6% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
