Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. An average long/short hedge fund returned only 5% due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Hawaiian Holdings, Inc. (NASDAQ:HA).
Hedge fund interest in Hawaiian Holdings, Inc. (NASDAQ:HA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), Matthews International Corp (NASDAQ:MATW), and Raven Industries, Inc. (NASDAQ:RAVN) to gather more data points.
To the average investor there are a multitude of signals shareholders use to evaluate their holdings. A couple of the most underrated signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite fund managers can beat the market by a significant margin (see the details here).
Let’s check out the fresh hedge fund action regarding Hawaiian Holdings, Inc. (NASDAQ:HA).
How have hedgies been trading Hawaiian Holdings, Inc. (NASDAQ:HA)?
Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018. By comparison, 16 hedge funds held shares or bullish call options in HA a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Third Avenue Management, managed by Martin Whitman, holds the most valuable position in Hawaiian Holdings, Inc. (NASDAQ:HA). Third Avenue Management has a $31.5 million position in the stock, comprising 2.5% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $29.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Jim Simons’s Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Gilchrist Berg’s Water Street Capital.
Since Hawaiian Holdings, Inc. (NASDAQ:HA) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital said goodbye to the biggest position of the 700 funds watched by Insider Monkey, worth close to $0.6 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund cut about $0.2 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Hawaiian Holdings, Inc. (NASDAQ:HA). We will take a look at Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), Matthews International Corp (NASDAQ:MATW), Raven Industries, Inc. (NASDAQ:RAVN), and Tootsie Roll Industries, Inc. (NYSE:TR). All of these stocks’ market caps are similar to HA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $87 million in HA’s case. Raven Industries, Inc. (NASDAQ:RAVN) is the most popular stock in this table. On the other hand Tootsie Roll Industries, Inc. (NYSE:TR) is the least popular one with only 11 bullish hedge fund positions. Hawaiian Holdings, Inc. (NASDAQ:HA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 HA wasn’t nearly as popular as these 15 stock and hedge funds that were betting on HA were disappointed as the stock returned 12.9% 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.