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Hedge Funds Have Never Been This Bullish On Hallmark Financial Services, Inc. (HALL)

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds.

Is Hallmark Financial Services, Inc. (NASDAQ:HALL) a splendid stock to buy now? Money managers are getting more optimistic. The number of long hedge fund positions inched up by 4 recently. Our calculations also showed that HALL 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Bronchick - Cove Street Capital

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we’re going to go over the latest hedge fund action regarding Hallmark Financial Services, Inc. (NASDAQ:HALL).

What does smart money think about Hallmark Financial Services, Inc. (NASDAQ:HALL)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HALL over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

HALL_nov2019

Among these funds, Cove Street Capital held the most valuable stake in Hallmark Financial Services, Inc. (NASDAQ:HALL), which was worth $22.3 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $5.9 million worth of shares. Moreover, Royce & Associates, Millennium Management, and Ancora Advisors were also bullish on Hallmark Financial Services, Inc. (NASDAQ:HALL), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Hallmark Financial Services, Inc. (NASDAQ:HALL) headfirst. Millennium Management, managed by Israel Englander, initiated the largest position in Hallmark Financial Services, Inc. (NASDAQ:HALL). Millennium Management had $1.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Thomas Bailard’s Bailard Inc, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hallmark Financial Services, Inc. (NASDAQ:HALL) but similarly valued. These stocks are Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), Armstrong Flooring, Inc. (NYSE:AFI), Farmland Partners Inc (NYSE:FPI), and Stellus Capital Investment Corporation (NYSE:SCM). All of these stocks’ market caps are closest to HALL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNST 8 54621 0
AFI 12 68024 0
FPI 8 8632 -1
SCM 4 8167 -2
Average 8 34861 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $34 million in HALL’s case. Armstrong Flooring, Inc. (NYSE:AFI) is the most popular stock in this table. On the other hand Stellus Capital Investment Corporation (NYSE:SCM) is the least popular one with only 4 bullish hedge fund positions. Hallmark Financial Services, Inc. (NASDAQ:HALL) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on HALL as the stock returned 34.4% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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