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Huntsman Corporation (HUN) Keeps Burning Hedge Funds

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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).

Huntsman Corporation (NYSE:HUN) shareholders have witnessed an increase in hedge fund interest of late. Our calculations also showed that HUN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Huntsman Corporation (NYSE:HUN).

How have hedgies been trading Huntsman Corporation (NYSE:HUN)?

Heading into the first quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HUN over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Two Sigma Advisors was the largest shareholder of Huntsman Corporation (NYSE:HUN), with a stake worth $59.5 million reported as of the end of September. Trailing Two Sigma Advisors was Royce & Associates, which amassed a stake valued at $58.1 million. AQR Capital Management, Citadel Investment Group, and Holocene Advisors 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 Swift Run Capital Management allocated the biggest weight to Huntsman Corporation (NYSE:HUN), around 11.13% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, setting aside 3.29 percent of its 13F equity portfolio to HUN.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Appian Way Asset Management, managed by Andrew Byington, established the most valuable position in Huntsman Corporation (NYSE:HUN). Appian Way Asset Management had $5.3 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $4.8 million investment in the stock during the quarter. The following funds were also among the new HUN investors: Joel Greenblatt’s Gotham Asset Management, Robert Vincent McHugh’s Jade Capital Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Huntsman Corporation (NYSE:HUN) but similarly valued. These stocks are NewMarket Corporation (NYSE:NEU), Marriott Vacations Worldwide Corporation (NYSE:VAC), Nexstar Media Group, Inc. (NASDAQ:NXST), and Primerica, Inc. (NYSE:PRI). This group of stocks’ market values are closest to HUN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEU 22 195365 -7
VAC 25 512208 -5
NXST 40 1488285 5
PRI 28 324417 2
Average 28.75 630069 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $630 million. That figure was $401 million in HUN’s case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand NewMarket Corporation (NYSE:NEU) is the least popular one with only 22 bullish hedge fund positions. Huntsman Corporation (NYSE:HUN) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately HUN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HUN were disappointed as the stock returned -36.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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