We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Herman Miller, Inc. (NASDAQ:MLHR) and determine whether hedge funds skillfully traded this stock.
Hedge fund interest in Herman Miller, Inc. (NASDAQ:MLHR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MLHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 Cooper Tire & Rubber Company (NYSE:CTB), Open Lending Corporation (NASDAQ:LPRO), and Southwestern Energy Company (NYSE:SWN) to gather more data points. Our calculations also showed that MLHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a peek at the key hedge fund action encompassing Herman Miller, Inc. (NASDAQ:MLHR).
What have hedge funds been doing with Herman Miller, Inc. (NASDAQ:MLHR)?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in MLHR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Herman Miller, Inc. (NASDAQ:MLHR), with a stake worth $69.7 million reported as of the end of September. Trailing AQR Capital Management was Arrowstreet Capital, which amassed a stake valued at $12 million. Renaissance Technologies, Ancora Advisors, and Gardner Russo & Gardner 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 Zebra Capital Management allocated the biggest weight to Herman Miller, Inc. (NASDAQ:MLHR), around 0.71% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, designating 0.41 percent of its 13F equity portfolio to MLHR.
Seeing as Herman Miller, Inc. (NASDAQ:MLHR) has witnessed a decline in interest from hedge fund managers, we can see that there is a sect of fund managers who were dropping their positions entirely in the second quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $4.5 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund dropped about $2.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Herman Miller, Inc. (NASDAQ:MLHR). We will take a look at Cooper Tire & Rubber Company (NYSE:CTB), Open Lending Corporation (NASDAQ:LPRO), Southwestern Energy Company (NYSE:SWN), Mack Cali Realty Corp (NYSE:CLI), Chesapeake Utilities Corporation (NYSE:CPK), Frontline Ltd (NYSE:FRO), and Karyopharm Therapeutics Inc (NASDAQ:KPTI). This group of stocks’ market valuations are similar to MLHR’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $113 million in MLHR’s case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Chesapeake Utilities Corporation (NYSE:CPK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Herman Miller, Inc. (NASDAQ:MLHR) is more popular among hedge funds. Our overall hedge fund sentiment score for MLHR is 78.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on MLHR as the stock returned 27.7% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.