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Hedge Funds Are Dumping Hilltop Holdings Inc. (HTH)

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Keeping this in mind, let’s take a look at whether Hilltop Holdings Inc. (NYSE:HTH) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Hilltop Holdings Inc. (NYSE:HTH) a buy right now? Hedge funds are becoming less confident. The number of bullish hedge fund positions shrunk by 1 in recent months. Our calculations also showed that HTH 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).

To the average investor there are a multitude of tools stock market investors can use to grade their holdings. Two of the less known tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can beat the S&P 500 by a solid margin (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the new hedge fund action surrounding Hilltop Holdings Inc. (NYSE:HTH).

What have hedge funds been doing with Hilltop Holdings Inc. (NYSE:HTH)?

Heading into the first quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTH over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Hilltop Holdings Inc. (NYSE:HTH), with a stake worth $22.1 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $16.6 million. Arrowstreet Capital, AQR Capital Management, and Forest Hill Capital 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 Forest Hill Capital allocated the biggest weight to Hilltop Holdings Inc. (NYSE:HTH), around 3.11% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to HTH.

Since Hilltop Holdings Inc. (NYSE:HTH) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of funds who were dropping their positions entirely by the end of the third quarter. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $1.4 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dumped its stock, about $0.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hilltop Holdings Inc. (NYSE:HTH) but similarly valued. We will take a look at Argo Group International Holdings, Ltd. (NYSE:ARGO), Acadia Realty Trust (NYSE:AKR), Kinsale Capital Group, Inc. (NASDAQ:KNSL), and Plexus Corp. (NASDAQ:PLXS). This group of stocks’ market values are similar to HTH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARGO 19 184829 3
AKR 13 81788 -3
KNSL 11 24521 -1
PLXS 24 119833 16
Average 16.75 102743 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $99 million in HTH’s case. Plexus Corp. (NASDAQ:PLXS) is the most popular stock in this table. On the other hand Kinsale Capital Group, Inc. (NASDAQ:KNSL) is the least popular one with only 11 bullish hedge fund positions. Hilltop Holdings Inc. (NYSE:HTH) 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately HTH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HTH were disappointed as the stock returned -40.2% 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.
5 Most Popular Stocks Among Hedge Funds
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.

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