As we already know from media reports and hedge fund investor letters, many hedge funds lost money in October, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about H&E Equipment Services, Inc. (NASDAQ:HEES) in this article.
H&E Equipment Services, Inc. (NASDAQ:HEES) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of September. 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 Kinsale Capital Group, Inc. (NASDAQ:KNSL), Luminex Corporation (NASDAQ:LMNX), and Monmouth R.E. Inv. Corp. (NYSE:MNR) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a look at the fresh hedge fund action regarding H&E Equipment Services, Inc. (NASDAQ:HEES).
How are hedge funds trading H&E Equipment Services, Inc. (NASDAQ:HEES)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in HEES at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Balyasny Asset Management was the largest shareholder of H&E Equipment Services, Inc. (NASDAQ:HEES), with a stake worth $7.4 million reported as of the end of September. Trailing Balyasny Asset Management was Two Sigma Advisors, which amassed a stake valued at $7.3 million. SG Capital Management, Algert Coldiron Investors, and PDT Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that H&E Equipment Services, Inc. (NASDAQ:HEES) has faced bearish sentiment from hedge fund managers, we can see that there is a sect of hedge funds who sold off their entire stakes in the third quarter. At the top of the heap, Noam Gottesman’s GLG Partners cut the biggest stake of all the hedgies tracked by Insider Monkey, valued at about $0.9 million in stock. Louis Navellier’s fund, Navellier & Associates, also sold off its stock, about $0.8 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to H&E Equipment Services, Inc. (NASDAQ:HEES). We will take a look at Kinsale Capital Group, Inc. (NASDAQ:KNSL), Luminex Corporation (NASDAQ:LMNX), Monmouth R.E. Inv. Corp. (NYSE:MNR), and Redwood Trust, Inc. (NYSE:RWT). This group of stocks’ market caps are similar to HEES’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 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $33 million in HEES’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand Kinsale Capital Group, Inc. (NASDAQ:KNSL) is the least popular one with only 5 bullish hedge fund positions. H&E Equipment Services, Inc. (NASDAQ:HEES) 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. In this regard LMNX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.