In this article we are going to use hedge fund sentiment as a tool and determine whether Heidrick & Struggles International, Inc. (NASDAQ:HSII) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is HSII a good stock to buy now? Investors who are in the know were getting less optimistic. The number of long hedge fund bets went down by 2 recently. Heidrick & Struggles International, Inc. (NASDAQ:HSII) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 22. Our calculations also showed that HSII 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.
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. Now let’s take a gander at the latest hedge fund action encompassing Heidrick & Struggles International, Inc. (NASDAQ:HSII).
Do Hedge Funds Think HSII Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HSII over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Heidrick & Struggles International, Inc. (NASDAQ:HSII) was held by Renaissance Technologies, which reported holding $27.6 million worth of stock at the end of September. It was followed by Royce & Associates with a $19.7 million position. Other investors bullish on the company included Stadium Capital Management, Engine Capital, and Invenomic Capital Management. In terms of the portfolio weights assigned to each position Stadium Capital Management allocated the biggest weight to Heidrick & Struggles International, Inc. (NASDAQ:HSII), around 3.56% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, setting aside 2.35 percent of its 13F equity portfolio to HSII.
Seeing as Heidrick & Struggles International, Inc. (NASDAQ:HSII) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers who were dropping their full holdings in the third quarter. At the top of the heap, Christopher Shackelton and Adam Gray’s Coliseum Capital dropped the biggest stake of all the hedgies monitored by Insider Monkey, comprising about $7 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $2.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Heidrick & Struggles International, Inc. (NASDAQ:HSII). These stocks are Donegal Group, Inc. (NASDAQ:DGICB), Altabancorp (NASDAQ:ALTA), BioDelivery Sciences International, Inc. (NASDAQ:BDSI), Avid Technology, Inc. (NASDAQ:AVID), VirnetX Holding Corporation (NYSE:VHC), Resources Connection, Inc. (NASDAQ:RGP), and TransMedics Group, Inc. (NASDAQ:TMDX). This group of stocks’ market values match HSII’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $76 million in HSII’s case. BioDelivery Sciences International, Inc. (NASDAQ:BDSI) is the most popular stock in this table. On the other hand Donegal Group, Inc. (NASDAQ:DGICB) is the least popular one with only 1 bullish hedge fund positions. Heidrick & Struggles International, Inc. (NASDAQ:HSII) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HSII is 54.6. 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. Hedge funds were also right about betting on HSII as the stock returned 40.9% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.