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Hedge Funds Warming Up To The Hain Celestial Group, Inc. (HAIN)

In this article you are going to find out whether hedge funds think The Hain Celestial Group, Inc. (NASDAQ:HAIN) is a good investment 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.

The Hain Celestial Group, Inc. (NASDAQ:HAIN) was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. HAIN investors should be aware of an increase in hedge fund interest lately. There were 17 hedge funds in our database with HAIN holdings at the end of the previous quarter. Our calculations also showed that HAIN 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.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Glenn Welling Engaged Capital

Glenn Welling of Engaged Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 let’s analyze the key hedge fund action encompassing The Hain Celestial Group, Inc. (NASDAQ:HAIN).

What have hedge funds been doing with The Hain Celestial Group, Inc. (NASDAQ:HAIN)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the fourth quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in HAIN a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is HAIN A Good Stock To Buy?

More specifically, Engaged Capital was the largest shareholder of The Hain Celestial Group, Inc. (NASDAQ:HAIN), with a stake worth $547.2 million reported as of the end of September. Trailing Engaged Capital was Paradice Investment Management, which amassed a stake valued at $61.4 million. GAMCO Investors, Greenhouse Funds, and D E Shaw 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 Engaged Capital allocated the biggest weight to The Hain Celestial Group, Inc. (NASDAQ:HAIN), around 71.73% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, designating 6.81 percent of its 13F equity portfolio to HAIN.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Greenhouse Funds, managed by Joe Milano, established the most outsized position in The Hain Celestial Group, Inc. (NASDAQ:HAIN). Greenhouse Funds had $16.7 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $5.2 million position during the quarter. The following funds were also among the new HAIN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Noam Gottesman’s GLG Partners, and David Harding’s Winton Capital Management.

Let’s go over hedge fund activity in other stocks similar to The Hain Celestial Group, Inc. (NASDAQ:HAIN). These stocks are Appian Corporation (NASDAQ:APPN), Farfetch Limited (NYSE:FTCH), Spirit Realty Capital Inc (NYSE:SRC), and Medallia, Inc. (NYSE:MDLA). All of these stocks’ market caps are closest to HAIN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APPN 17 374002 0
FTCH 22 400841 -5
SRC 18 76385 -8
MDLA 20 237596 -2
Average 19.25 272206 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $705 million in HAIN’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 17 bullish hedge fund positions. The Hain Celestial Group, Inc. (NASDAQ:HAIN) 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on HAIN, though not to the same extent, as the stock returned 22.1% during the first two months and seventeen days of the second quarter and outperformed the market as well.

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