Is HOFT A Good Stock To Buy Now?

In this article we will take a look at whether hedge funds think Hooker Furniture Corporation (NASDAQ:HOFT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is HOFT a good stock to buy now? Hooker Furniture Corporation (NASDAQ:HOFT) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. HOFT has experienced an increase in hedge fund sentiment lately. There were 8 hedge funds in our database with HOFT positions at the end of the second quarter. Our calculations also showed that HOFT 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.

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 66 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.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

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. Keeping this in mind we’re going to analyze the latest hedge fund action encompassing Hooker Furniture Corporation (NASDAQ:HOFT).

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

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in HOFT a year ago. 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, Pzena Investment Management was the largest shareholder of Hooker Furniture Corporation (NASDAQ:HOFT), with a stake worth $41.7 million reported as of the end of September. Trailing Pzena Investment Management was Royce & Associates, which amassed a stake valued at $33.8 million. Arrowstreet Capital, Renaissance Technologies, and Marshall Wace LLP 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 Hooker Furniture Corporation (NASDAQ:HOFT), around 0.36% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, designating 0.26 percent of its 13F equity portfolio to HOFT.

Consequently, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Hooker Furniture Corporation (NASDAQ:HOFT). Marshall Wace LLP had $1.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.6 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hooker Furniture Corporation (NASDAQ:HOFT) but similarly valued. These stocks are Americas Gold and Silver Corporation (NYSE:USAS), OneWater Marine Inc. (NASDAQ:ONEW), Del Taco Restaurants Inc (NASDAQ:TACO), Ares Commercial Real Estate Corp (NYSE:ACRE), Noodles & Co (NASDAQ:NDLS), Oxford Immunotec Global PLC (NASDAQ:OXFD), and GTT Communications Inc (NYSE:GTT). This group of stocks’ market caps match HOFT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
USAS 4 6087 -2
ONEW 11 38634 6
TACO 15 21195 3
ACRE 9 24591 -1
NDLS 19 67028 1
OXFD 20 136176 2
GTT 9 87069 0
Average 12.4 54397 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $85 million in HOFT’s case. Oxford Immunotec Global PLC (NASDAQ:OXFD) is the most popular stock in this table. On the other hand Americas Gold and Silver Corporation (NYSE:USAS) is the least popular one with only 4 bullish hedge fund positions. Hooker Furniture Corporation (NASDAQ:HOFT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HOFT is 50.8. 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 HOFT as the stock returned 25.4% 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.