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Hedge Funds Never Been Less Bullish On Herc Holdings Inc. (HRI)

In this article we will take a look at whether hedge funds think Herc Holdings Inc. (NYSE:HRI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Herc Holdings Inc. (NYSE:HRI) an excellent investment right now? Hedge funds are becoming less confident. The number of bullish hedge fund bets were cut by 4 in recent months. Our calculations also showed that HRI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

According to most stock holders, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are over 8000 funds trading at present, Our researchers choose to focus on the crème de la crème of this group, about 850 funds. Most estimates calculate that this group of people handle the lion’s share of the hedge fund industry’s total asset base, and by keeping track of their best stock picks, Insider Monkey has spotted many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Carl Icahn - Icahn Capital Lp

Carl Icahn of Icahn Capital LP

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the key hedge fund action surrounding Herc Holdings Inc. (NYSE:HRI).

How are hedge funds trading Herc Holdings Inc. (NYSE:HRI)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HRI over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Icahn Capital LP held the most valuable stake in Herc Holdings Inc. (NYSE:HRI), which was worth $92 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $76.1 million worth of shares. Nut Tree Capital, Renaissance Technologies, and Redwood Capital 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 Nut Tree Capital allocated the biggest weight to Herc Holdings Inc. (NYSE:HRI), around 6.88% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, designating 1.73 percent of its 13F equity portfolio to HRI.

Judging by the fact that Herc Holdings Inc. (NYSE:HRI) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds who were dropping their entire stakes heading into Q4. Interestingly, Richard S. Meisenberg’s ACK Asset Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $8 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund said goodbye to about $3.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Herc Holdings Inc. (NYSE:HRI). We will take a look at ImmunoGen, Inc. (NASDAQ:IMGN), Columbus McKinnon Corporation (NASDAQ:CMCO), Accel Entertainment, Inc. (NYSE:ACEL), and Changyou.Com Ltd (NASDAQ:CYOU). This group of stocks’ market caps resemble HRI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IMGN 19 150998 1
CMCO 16 28308 -3
ACEL 18 69509 3
CYOU 10 72996 -3
Average 15.75 80453 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $232 million in HRI’s case. ImmunoGen, Inc. (NASDAQ:IMGN) is the most popular stock in this table. On the other hand Changyou.Com Ltd (NASDAQ:CYOU) is the least popular one with only 10 bullish hedge fund positions. Herc Holdings Inc. (NYSE:HRI) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on HRI as the stock returned 38.9% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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