Do Hedge Funds Love H&R Block, Inc. (HRB)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards H&R Block, Inc. (NYSE:HRB) changed recently.

H&R Block, Inc. (NYSE:HRB) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 44. HRB has experienced an increase in activity from the world’s largest hedge funds recently. There were 23 hedge funds in our database with HRB holdings at the end of December. Our calculations also showed that HRB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Prem Watsa of Fairfax Financial Holdings

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the key hedge fund action regarding H&R Block, Inc. (NYSE:HRB).

Do Hedge Funds Think HRB Is A Good Stock To Buy Now?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in HRB over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D E Shaw was the largest shareholder of H&R Block, Inc. (NYSE:HRB), with a stake worth $54.7 million reported as of the end of March. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $35.6 million. GLG Partners, Millennium Management, and Fairfax Financial Holdings 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 Rings Capital Management allocated the biggest weight to H&R Block, Inc. (NYSE:HRB), around 1.76% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, dishing out 1.7 percent of its 13F equity portfolio to HRB.

Consequently, key hedge funds were breaking ground themselves. Fairfax Financial Holdings, managed by Prem Watsa, established the largest position in H&R Block, Inc. (NYSE:HRB). Fairfax Financial Holdings had $16.8 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also initiated a $13.7 million position during the quarter. The following funds were also among the new HRB investors: Bill Miller’s Miller Value Partners, Brandon Haley’s Holocene Advisors, and Joe Huber’s Huber Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as H&R Block, Inc. (NYSE:HRB) but similarly valued. We will take a look at Atotech Limited (NYSE:ATC), Goosehead Insurance, Inc. (NASDAQ:GSHD), The Brink’s Company (NYSE:BCO), Southwest Gas Holdings, Inc. (NYSE:SWX), Colliers International Group Inc (NASDAQ:CIGI), AllianceBernstein Holding LP (NYSE:AB), and Rapid7 Inc (NASDAQ:RPD). This group of stocks’ market values are closest to HRB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATC 17 69894 17
GSHD 24 162339 3
BCO 24 406832 -2
SWX 23 159735 6
CIGI 14 866464 3
AB 8 40384 -1
RPD 25 151718 4
Average 19.3 265338 4.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $229 million in HRB’s case. Rapid7 Inc (NASDAQ:RPD) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks H&R Block, Inc. (NYSE:HRB) is more popular among hedge funds. Our overall hedge fund sentiment score for HRB is 77.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on HRB, though not to the same extent, as the stock returned 11.7% since the end of March (through July 9th) and outperformed the market as well.

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