Is Heartland Financial USA Inc (HTLF) Going to Burn These Hedge Funds?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Heartland Financial USA Inc (NASDAQ:HTLF).

Is Heartland Financial USA Inc (NASDAQ:HTLF) a cheap investment today? The best stock pickers are getting less optimistic. The number of bullish hedge fund bets were cut by 1 lately. Our calculations also showed that HTLF isn’t among the 30 most popular stocks among hedge funds. HTLF was in 6 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with HTLF positions at the end of the previous quarter.

Today there are a large number of gauges stock traders put to use to grade publicly traded companies. A duo of the less utilized gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outpace the S&P 500 by a superb amount (see the details here).


Cliff Asness of AQR Capital Management

We’re going to view the new hedge fund action regarding Heartland Financial USA Inc (NASDAQ:HTLF).

Hedge fund activity in Heartland Financial USA Inc (NASDAQ:HTLF)

Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in HTLF heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds HTLF Positions

The largest stake in Heartland Financial USA Inc (NASDAQ:HTLF) was held by Renaissance Technologies, which reported holding $9.6 million worth of stock at the end of September. It was followed by AQR Capital Management with a $9 million position. Other investors bullish on the company included Royce & Associates, Two Sigma Advisors, and PEAK6 Capital Management.

Judging by the fact that Heartland Financial USA Inc (NASDAQ:HTLF) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their entire stakes heading into Q3. Intriguingly, Israel Englander’s Millennium Management dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $6.1 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dumped about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Heartland Financial USA Inc (NASDAQ:HTLF). We will take a look at NetGear, Inc. (NASDAQ:NTGR), Uxin Limited (NASDAQ:UXIN), Wingstop Inc (NASDAQ:WING), and Cubic Corporation (NYSE:CUB). This group of stocks’ market values match HTLF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTGR 16 36926 0
UXIN 5 197910 -7
WING 17 94474 -1
CUB 18 103213 5
Average 14 108131 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $23 million in HTLF’s case. Cubic Corporation (NYSE:CUB) is the most popular stock in this table. On the other hand Uxin Limited (NASDAQ:UXIN) is the least popular one with only 5 bullish hedge fund positions. Heartland Financial USA Inc (NASDAQ:HTLF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CUB might be a better candidate to consider a long position.

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