Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility and underperformance. The time period between the end of June 2015 and the end of June 2016 was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have been underperforming the large-cap indices. However, things have dramatically changed over the last 5 months. Small-cap stocks reversed their misfortune and beat the large cap indices by almost 11 percentage points since the end of June. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Hubbell Incorporated (NYSE:HUBB).
Is Hubbell Incorporated (NYSE:HUBB) a safe investment today? Investors who are in the know seem to be getting less optimistic. The number of bullish hedge fund positions disclosed by funds tracked by us retreated by six last quarter. At the end of this article we will also compare HUBB to other stocks including EnLink Midstream Partners LP (NYSE:ENLK), KAR Auction Services Inc (NYSE:KAR), and Arista Networks Inc (NYSE:ANET) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to review the key action surrounding Hubbell Incorporated (NYSE:HUBB).
What have hedge funds been doing with Hubbell Incorporated (NYSE:HUBB)?
At the end of September, 16 funds tracked by Insider Monkey were long Hubbell Incorporated, down by 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HUBB over the last five quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the largest position in Hubbell Incorporated (NYSE:HUBB). Royce & Associates has a $105.7 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Adage Capital Management, led by Phill Gross and Robert Atchinson, which holds a $58.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Ken Griffin’s Citadel Investment Group, David E. Shaw’s D E Shaw and Jim Simons’s Renaissance Technologies. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $10.3 million in stock, and Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners was right behind this move, as the fund dropped about $2.6 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hubbell Incorporated(NYSE:HUBB) but similarly valued. These stocks are EnLink Midstream Partners LP (NYSE:ENLK), KAR Auction Services Inc (NYSE:KAR), Arista Networks Inc (NYSE:ANET), and TIM Participacoes SA (ADR) (NYSE:TSU). All of these stocks’ market caps are similar to HUBB’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 19 investors with bullish positions and the average amount invested in these stocks was $398 million. That figure was $419 million in HUBB’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand EnLink Midstream Partners LP (NYSE:ENLK) is the least popular one with only 11 funds holding shares. Hubbell Incorporated (NYSE:HUBB) 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. In this regard KAR Auction Services Inc (NYSE:KAR) might be a better candidate to consider taking a long position in.