Is H&R Block, Inc. (NYSE:HRB) 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 H&R Block, Inc. (NYSE:HRB) a healthy stock for your portfolio? The smart money is taking a bearish view. The number of long hedge fund positions were trimmed by 4 in recent months. Our calculations also showed that HRB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are many indicators market participants put to use to assess their stock investments. A duo of the less utilized indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass the broader indices by a very impressive margin (see the details here).
David E. Shaw of D.E. Shaw
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the new hedge fund action encompassing H&R Block, Inc. (NYSE:HRB).
What does smart money think about H&R Block, Inc. (NYSE:HRB)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HRB over the last 17 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in H&R Block, Inc. (NYSE:HRB), which was worth $104 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $102.4 million worth of shares. Citadel Investment Group, GLG Partners, and GAMCO Investors 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 Cognios Capital allocated the biggest weight to H&R Block, Inc. (NYSE:HRB), around 0.87% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to HRB.
Seeing as H&R Block, Inc. (NYSE:HRB) has faced declining sentiment from the smart money, it’s safe to say that there is a sect of hedgies that slashed their entire stakes heading into Q4. It’s worth mentioning that Renaissance Technologies said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $49.1 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund dropped about $19.6 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as H&R Block, Inc. (NYSE:HRB) but similarly valued. These stocks are Tetra Tech, Inc. (NASDAQ:TTEK), The New York Times Company (NYSE:NYT), Nexstar Media Group, Inc. (NASDAQ:NXST), and Armstrong World Industries, Inc. (NYSE:AWI). This group of stocks’ market valuations are similar to HRB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTEK | 21 | 123653 | -1 |
| NYT | 37 | 1186018 | -4 |
| NXST | 34 | 1329838 | -6 |
| AWI | 29 | 505278 | -1 |
| Average | 30.25 | 786197 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $786 million. That figure was $322 million in HRB’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Tetra Tech, Inc. (NASDAQ:TTEK) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks H&R Block, Inc. (NYSE:HRB) is even less popular than TTEK. Hedge funds dodged a bullet by taking a bearish stance towards HRB. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HRB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HRB investors were disappointed as the stock returned 3.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
