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Hedge Funds Can’t Stop Buying Haemonetics Corporation (HAE)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Haemonetics Corporation (NYSE:HAE) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Haemonetics Corporation (NYSE:HAE) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Haemonetics Corporation (NYSE:HAE) was in 39 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HAE 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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 junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now let’s check out the new hedge fund action encompassing Haemonetics Corporation (NYSE:HAE).

How are hedge funds trading Haemonetics Corporation (NYSE:HAE)?

At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HAE over the last 20 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Haemonetics Corporation (NYSE:HAE), which was worth $195.9 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $73.2 million worth of shares. Royce & Associates, Nitorum Capital, and Millennium Management 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 BeaconLight Capital allocated the biggest weight to Haemonetics Corporation (NYSE:HAE), around 2.84% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, earmarking 1.82 percent of its 13F equity portfolio to HAE.

As aggregate interest increased, key money managers have jumped into Haemonetics Corporation (NYSE:HAE) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Haemonetics Corporation (NYSE:HAE). Arrowstreet Capital had $18.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $11.3 million investment in the stock during the quarter. The following funds were also among the new HAE investors: Donald Sussman’s Paloma Partners, Michael Gelband’s ExodusPoint Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Haemonetics Corporation (NYSE:HAE) but similarly valued. These stocks are MyoKardia, Inc. (NASDAQ:MYOK), TCF Financial Corporation (NASDAQ:TCF), Western Midstream Partners, LP (NYSE:WES), Life Storage, Inc. (NYSE:LSI), The Descartes Systems Group Inc (NASDAQ:DSGX), Vertiv Holdings Co (NYSE:VRT), and MDU Resources Group Inc (NYSE:MDU). This group of stocks’ market valuations are closest to HAE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYOK 45 1360886 12
TCF 14 85082 -5
WES 11 79571 -1
LSI 19 137533 -3
DSGX 10 196345 0
VRT 40 747088 1
MDU 21 182406 -4
Average 22.9 398416 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $533 million in HAE’s case. MyoKardia, Inc. (NASDAQ:MYOK) is the most popular stock in this table. On the other hand The Descartes Systems Group Inc (NASDAQ:DSGX) is the least popular one with only 10 bullish hedge fund positions. Haemonetics Corporation (NYSE:HAE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HAE is 81.4. 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. 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 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 gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately HAE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HAE were disappointed as the stock returned 0.1% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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