Hedge Funds Have Never Been This Bullish On Harmonic Inc (HLIT)

Is Harmonic Inc (NASDAQ:HLIT) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Harmonic Inc (NASDAQ:HLIT) a healthy stock for your portfolio? Hedge funds are getting more optimistic. The number of bullish hedge fund positions improved by 5 recently. Our calculations also showed that HLIT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

At the moment there are dozens of tools stock traders can use to evaluate publicly traded companies. Some of the less known tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can outclass their index-focused peers by a solid margin (see the details here).


Israel Englander of Millennium Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action regarding Harmonic Inc (NASDAQ:HLIT).

What does smart money think about Harmonic Inc (NASDAQ:HLIT)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in HLIT a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the number one position in Harmonic Inc (NASDAQ:HLIT). Scopia Capital has a $33.8 million position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by Divisar Capital, led by Steven Baughman, holding a $17.9 million position; 5.9% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions consist of William C. Martin’s Raging Capital Management, Renaissance Technologies and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Harmonic Inc (NASDAQ:HLIT), around 5.94% of its 13F portfolio. Scopia Capital is also relatively very bullish on the stock, setting aside 1.98 percent of its 13F equity portfolio to HLIT.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Boardman Bay Capital Management, managed by Will Graves, created the most valuable position in Harmonic Inc (NASDAQ:HLIT). Boardman Bay Capital Management had $0.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.3 million investment in the stock during the quarter. The other funds with brand new HLIT positions are Matthew Hulsizer’s PEAK6 Capital Management, Michael Gelband’s ExodusPoint Capital, and Steve Cohen’s Point72 Asset Management.

Let’s go over hedge fund activity in other stocks similar to Harmonic Inc (NASDAQ:HLIT). We will take a look at Johnson Outdoors Inc. (NASDAQ:JOUT), Mercantile Bank Corporation (NASDAQ:MBWM), Crossamerica Partners LP (NYSE:CAPL), and Global Cord Blood Corporation (NYSE:CO). This group of stocks’ market valuations are similar to HLIT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JOUT 12 61479 2
MBWM 8 31156 1
CAPL 1 4401 0
CO 11 29108 2
Average 8 31536 1.25

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 $32 million. That figure was $80 million in HLIT’s case. Johnson Outdoors Inc. (NASDAQ:JOUT) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Harmonic Inc (NASDAQ:HLIT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on HLIT as the stock returned 25.5% during the first two months of Q4 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.