Do Hedge Funds Love Houghton Mifflin Harcourt Co (HMHC)?

The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Houghton Mifflin Harcourt Co (NASDAQ:HMHC) based on those filings.

Houghton Mifflin Harcourt Co (NASDAQ:HMHC) was in 13 hedge funds’ portfolios at the end of the third quarter of 2018. HMHC investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 16 hedge funds in our database with HMHC holdings at the end of the previous quarter. Our calculations also showed that hmhc 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.

Anchorage Capital 2014 Q2 Investor Letter

Let’s take a gander at the latest hedge fund action regarding Houghton Mifflin Harcourt Co (NASDAQ:HMHC).

What does the smart money think about Houghton Mifflin Harcourt Co (NASDAQ:HMHC)?

Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the second quarter of 2018. By comparison, 22 hedge funds held shares or bullish call options in HMHC heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with HMHC Positions

According to Insider Monkey’s hedge fund database, Anchorage Advisors, managed by Kevin Michael Ulrich and Anthony Davis, holds the most valuable position in Houghton Mifflin Harcourt Co (NASDAQ:HMHC). Anchorage Advisors has a $140.6 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Gilchrist Berg of Water Street Capital, with a $66.4 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Other peers that are bullish contain Chuck Royce’s Royce & Associates, Steve Pei’s Gratia Capital and Ken Griffin’s Citadel Investment Group.

Judging by the fact that Houghton Mifflin Harcourt Co (NASDAQ:HMHC) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of fund managers who sold off their full holdings in the third quarter. At the top of the heap, David Costen Haley’s HBK Investments dumped the biggest position of the 700 funds monitored by Insider Monkey, comprising an estimated $1.9 million in stock. Robert Rodriguez and Steven Romick’s fund, First Pacific Advisors LLC, also dumped its stock, about $1.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Houghton Mifflin Harcourt Co (NASDAQ:HMHC) but similarly valued. We will take a look at The Providence Service Corporation (NASDAQ:PRSC), United Financial Bancorp, Inc. (NASDAQ:UBNK), Adecoagro SA (NYSE:AGRO), and Comtech Telecommunications Corp. (NASDAQ:CMTL). This group of stocks’ market caps are closest to HMHC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRSC 12 181978 -1
UBNK 13 65660 -1
AGRO 16 188658 -1
CMTL 14 150226 -1
Average 13.75 146631 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $147 million. That figure was $234 million in HMHC’s case. Adecoagro SA (NYSE:AGRO) is the most popular stock in this table. On the other hand The Providence Service Corporation (NASDAQ:PRSC) is the least popular one with only 12 bullish hedge fund positions. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AGRO might be a better candidate to consider a long position.

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