Is HEES A Good Stock To Buy Now?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards H&E Equipment Services, Inc. (NASDAQ:HEES).

Is HEES a good stock to buy now? H&E Equipment Services, Inc. (NASDAQ:HEES) shareholders have witnessed a decrease in hedge fund sentiment lately. H&E Equipment Services, Inc. (NASDAQ:HEES) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. Our calculations also showed that HEES isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s review the recent hedge fund action surrounding H&E Equipment Services, Inc. (NASDAQ:HEES).

Do Hedge Funds Think HEES Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in HEES a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in H&E Equipment Services, Inc. (NASDAQ:HEES) was held by Arrowstreet Capital, which reported holding $8 million worth of stock at the end of September. It was followed by Portolan Capital Management with a $8 million position. Other investors bullish on the company included Two Sigma Advisors, Electron Capital Partners, and D E Shaw. In terms of the portfolio weights assigned to each position Portolan Capital Management allocated the biggest weight to H&E Equipment Services, Inc. (NASDAQ:HEES), around 0.9% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to HEES.

Due to the fact that H&E Equipment Services, Inc. (NASDAQ:HEES) has faced falling interest from hedge fund managers, we can see that there is a sect of hedge funds who were dropping their entire stakes in the third quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $15.1 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also dropped its stock, about $2.8 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to H&E Equipment Services, Inc. (NASDAQ:HEES). These stocks are Kforce Inc. (NASDAQ:KFRC), Everi Holdings Inc (NYSE:EVRI), Phibro Animal Health Corp (NASDAQ:PAHC), IMAX Corporation (NYSE:IMAX), Limelight Networks, Inc. (NASDAQ:LLNW), Hudson Ltd. (NYSE:HUD), and Nexa Resources S.A. (NYSE:NEXA). All of these stocks’ market caps match HEES’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KFRC 19 48975 3
EVRI 26 158471 3
PAHC 15 44143 0
IMAX 18 71718 -1
LLNW 17 74271 -7
HUD 16 83748 -5
NEXA 2 2468 -2
Average 16.1 69113 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $39 million in HEES’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand Nexa Resources S.A. (NYSE:NEXA) is the least popular one with only 2 bullish hedge fund positions. H&E Equipment Services, Inc. (NASDAQ:HEES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HEES is 49.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on HEES as the stock returned 47.7% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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