Is Hortonworks Inc (HDP) Worthy of Your Portfolio?

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We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Hortonworks Inc (NASDAQ:HDP) and what that likely means for the prospects of the company and its stock.

At the end of September, 14 funds tracked by Insider Monkey held shares of Hortonworks Inc (NASDAQ:HDP). The company registered an increase in popularity during the third quarter, as there had been 10 funds bullish on HDP at the end of June. 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 Editas Medicine Inc (NASDAQ:EDIT), Live Oak Bancshares Inc (NASDAQ:LOB), and Bristow Group Inc (NYSE:BRS) to gather more data points.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Now, we’re going to take a peek at the key action encompassing Hortonworks Inc (NASDAQ:HDP).

How are hedge funds trading Hortonworks Inc (NASDAQ:HDP)?

As stated earlier, heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, up by 40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HDP over the last five quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

HDP Chart

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Passport Capital, led by John Burbank, holds the biggest position in Hortonworks Inc (NASDAQ:HDP). Passport Capital has a $40.9 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by Ken Griffin’s Citadel Investment Group, which disclosed a $17.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock.

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