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Huntsman Corporation (HUN): Hedge Fund Interest Is Picking Up

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Huntsman Corporation (NYSE:HUN) and determine whether hedge funds had an edge regarding this stock.

Is Huntsman Corporation (NYSE:HUN) an exceptional investment right now? The smart money was in a bullish mood. The number of bullish hedge fund bets advanced by 4 recently. Huntsman Corporation (NYSE:HUN) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 47. Our calculations also showed that HUN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 21 hedge funds in our database with HUN positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Huntsman Corporation (NYSE:HUN).

What have hedge funds been doing with Huntsman Corporation (NYSE:HUN)?

Heading into the third quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the first quarter of 2020. By comparison, 30 hedge funds held shares or bullish call options in HUN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Donald Yacktman’s Yacktman Asset Management has the number one position in Huntsman Corporation (NYSE:HUN), worth close to $119.6 million, corresponding to 1.9% of its total 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $43.7 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions consist of Brandon Haley’s Holocene Advisors, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Swift Run Capital Management allocated the biggest weight to Huntsman Corporation (NYSE:HUN), around 7.1% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, earmarking 3.7 percent of its 13F equity portfolio to HUN.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Sandbar Asset Management, managed by Michael Cowley, assembled the largest position in Huntsman Corporation (NYSE:HUN). Sandbar Asset Management had $12 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $5.8 million investment in the stock during the quarter. The other funds with brand new HUN positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Donald Sussman’s Paloma Partners, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Huntsman Corporation (NYSE:HUN) but similarly valued. We will take a look at Qurate Retail, Inc. (NASDAQ:QRTEA), BridgeBio Pharma, Inc. (NASDAQ:BBIO), Healthcare Realty Trust Inc (NYSE:HR), JBG SMITH Properties (NYSE:JBGS), Eldorado Resorts Inc (NASDAQ:ERI), Hawaiian Electric Industries, Inc. (NYSE:HE), and Envestnet Inc (NYSE:ENV). This group of stocks’ market caps match HUN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QRTEA 43 743396 11
BBIO 14 1341110 2
HR 22 155771 11
JBGS 25 283097 5
ERI 49 733973 10
HE 16 159237 3
ENV 19 85387 2
Average 26.9 500282 6.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $355 million in HUN’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 14 bullish hedge fund positions. Huntsman Corporation (NYSE:HUN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HUN is 40.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on HUN as the stock returned 19.7% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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