In this article we will check out the progression of hedge fund sentiment towards Hawkins, Inc. (NASDAQ:HWKN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hawkins, Inc. (NASDAQ:HWKN) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. Our calculations also showed that HWKN 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 stocks recommended/scorned by legendary Bill Miller. 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. Now let’s review the latest hedge fund action surrounding Hawkins, Inc. (NASDAQ:HWKN).
What have hedge funds been doing with Hawkins, Inc. (NASDAQ:HWKN)?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the fourth quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in HWKN a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Hawkins, Inc. (NASDAQ:HWKN), which was worth $3.8 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $3.1 million worth of shares. Winton Capital Management, Citadel Investment Group, and Two Sigma 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 Royce & Associates allocated the biggest weight to Hawkins, Inc. (NASDAQ:HWKN), around 0.04% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to HWKN.
Judging by the fact that Hawkins, Inc. (NASDAQ:HWKN) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers that slashed their full holdings in the first quarter. Intriguingly, D. E. Shaw’s D E Shaw dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $0.3 million in stock. Peter Algert and Kevin Coldiron’s fund, Algert Coldiron Investors, also cut its stock, about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hawkins, Inc. (NASDAQ:HWKN) but similarly valued. These stocks are Switchback Energy Acquisition Corporation (NYSE:SBE), Yirendai Ltd. (NYSE:YRD), Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP), and Flushing Financial Corporation (NASDAQ:FFIC). All of these stocks’ market caps resemble HWKN’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 9 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $8 million in HWKN’s case. Switchback Energy Acquisition Corporation (NYSE:SBE) is the most popular stock in this table. On the other hand Yirendai Ltd. (NYSE:YRD) is the least popular one with only 2 bullish hedge fund positions. Hawkins, Inc. (NASDAQ:HWKN) is not the least popular stock in this group but hedge fund interest is still below 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on HWKN, though not to the same extent, as the stock returned 20.5% during the second quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.