Hedge Funds Have Never Been Less Bullish About Herbalife Nutrition Ltd. (HLF)

We can judge whether Herbalife Nutrition Ltd. (NYSE:HLF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Herbalife Nutrition Ltd. (NYSE:HLF) was in 27 hedge funds’ portfolios at the end of June. HLF has experienced a decrease in activity from the world’s largest hedge funds of late. There were 32 hedge funds in our database with HLF positions at the end of the previous quarter. Our calculations also showed that HLF isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.

CAS Investment Partners, Cliff Sosin

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the new hedge fund action regarding Herbalife Nutrition Ltd. (NYSE:HLF).

What have hedge funds been doing with Herbalife Nutrition Ltd. (NYSE:HLF)?

At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HLF over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Icahn Capital LP was the largest shareholder of Herbalife Nutrition Ltd. (NYSE:HLF), with a stake worth $1506.3 million reported as of the end of March. Trailing Icahn Capital LP was Deccan Value Advisors, which amassed a stake valued at $416.4 million. Renaissance Technologies, D E Shaw, and CAS Investment Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Because Herbalife Nutrition Ltd. (NYSE:HLF) has faced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few funds who sold off their full holdings last quarter. Interestingly, Howard Marks’s Oaktree Capital Management cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at close to $12.7 million in stock. Alec Litowitz and Ross Laser’s fund, Magnetar Capital, also said goodbye to its stock, about $7.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Herbalife Nutrition Ltd. (NYSE:HLF) but similarly valued. We will take a look at CubeSmart (NYSE:CUBE), Enel Chile S.A. (NYSE:ENIC), Donaldson Company, Inc. (NYSE:DCI), and Gerdau SA (NYSE:GGB). All of these stocks’ market caps match HLF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CUBE 18 384323 -2
ENIC 6 28723 1
DCI 16 152244 0
GGB 7 117146 -3
Average 11.75 170609 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $2753 million in HLF’s case. CubeSmart (NYSE:CUBE) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Herbalife Nutrition Ltd. (NYSE:HLF) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HLF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HLF were disappointed as the stock returned -11.5% during the third quarter 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 in Q3.

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