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Is Hooker Furniture Corporation (HOFT) A Good Stock To Buy ?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Hooker Furniture Corporation (NASDAQ:HOFT).

Is Hooker Furniture Corporation (NASDAQ:HOFT) a bargain? Prominent investors are becoming more confident. The number of long hedge fund bets moved up by 4 in recent months. 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 below for Q2 rankings). HOFT was in 10 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with HOFT holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the new hedge fund action surrounding Hooker Furniture Corporation (NASDAQ:HOFT).

What does smart money think about Hooker Furniture Corporation (NASDAQ:HOFT)?

Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in HOFT 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.

Is HOFT A Good Stock To Buy?

More specifically, Royce & Associates was the largest shareholder of Hooker Furniture Corporation (NASDAQ:HOFT), with a stake worth $31.2 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $5.6 million. Millennium Management, AQR Capital Management, and Arrowstreet Capital 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 0.29% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to HOFT.

Consequently, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, created the largest position in Hooker Furniture Corporation (NASDAQ:HOFT). Millennium Management had $2.8 million invested in the company at the end of the quarter. Richard S. Pzena’s Pzena Investment Management also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw and Roger Ibbotson’s Zebra Capital Management.

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 Invacare Corporation (NYSE:IVC), Assembly Biosciences Inc (NASDAQ:ASMB), Landcadia Holdings, Inc. (NASDAQ:LCAHU), and Tiptree Inc. (NASDAQ:TIPT). 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
IVC 13 68290 -1
ASMB 16 64291 -2
LCAHU 20 85875 2
TIPT 2 1509 -2
Average 12.75 54991 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $46 million in HOFT’s case. Landcadia Holdings, Inc. (NASDAQ:LCAHU) is the most popular stock in this table. On the other hand Tiptree Inc. (NASDAQ:TIPT) is the least popular one with only 2 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 calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on HOFT as the stock returned 11.1% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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