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Hedge Funds Have Never Been This Bullish On HNI Corp (HNI)

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about HNI Corp (NYSE:HNI).

Is HNI Corp (NYSE:HNI) the right investment to pursue these days? Investors who are in the know are in a bullish mood. The number of long hedge fund bets advanced by 8 lately. Our calculations also showed that HNI isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BlueMountain Capital Management's Returns, AUM and Holdings

We’re going to take a look at the key hedge fund action encompassing HNI Corp (NYSE:HNI).

What have hedge funds been doing with HNI Corp (NYSE:HNI)?

At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 80% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in HNI a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

HNI_apr2019

More specifically, Royce & Associates was the largest shareholder of HNI Corp (NYSE:HNI), with a stake worth $11.5 million reported as of the end of December. Trailing Royce & Associates was D E Shaw, which amassed a stake valued at $3.4 million. Citadel Investment Group, Millennium Management, and Blue Mountain Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, assembled the largest position in HNI Corp (NYSE:HNI). D E Shaw had $3.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Joel Greenblatt’s Gotham Asset Management, and Ronald Hua’s Qtron Investments.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as HNI Corp (NYSE:HNI) but similarly valued. We will take a look at Cision Ltd. (NYSE:CISN), Pretium Resources Inc (NYSE:PVG), CareTrust REIT, Inc. (NASDAQ:CTRE), and The Simply Good Foods Company (NASDAQ:SMPL). This group of stocks’ market caps resemble HNI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CISN 17 52538 0
PVG 22 124075 5
CTRE 16 125667 5
SMPL 25 184420 2
Average 20 121675 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $29 million in HNI’s case. The Simply Good Foods Company (NASDAQ:SMPL) is the most popular stock in this table. On the other hand CareTrust REIT, Inc. (NASDAQ:CTRE) is the least popular one with only 16 bullish hedge fund positions. HNI Corp (NYSE:HNI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HNI wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); HNI investors were disappointed as the stock returned 1.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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