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Is Hubbell Incorporated (HUBB) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Hubbell Incorporated (NYSE:HUBB) and determine whether hedge funds skillfully traded this stock.

Is Hubbell Incorporated (NYSE:HUBB) a buy, sell, or hold? The best stock pickers were betting on the stock. The number of bullish hedge fund bets went up by 14 in recent months. Hubbell Incorporated (NYSE:HUBB) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. Our calculations also showed that HUBB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 15 hedge funds in our database with HUBB holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to take a peek at the fresh hedge fund action regarding Hubbell Incorporated (NYSE:HUBB).

Hedge fund activity in Hubbell Incorporated (NYSE:HUBB)

At the end of June, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 93% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HUBB over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, Impax Asset Management was the largest shareholder of Hubbell Incorporated (NYSE:HUBB), with a stake worth $99.1 million reported as of the end of September. Trailing Impax Asset Management was Renaissance Technologies, which amassed a stake valued at $59.1 million. Royce & Associates, AQR Capital Management, and Millennium Management 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 Bronson Point Partners allocated the biggest weight to Hubbell Incorporated (NYSE:HUBB), around 3.08% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, setting aside 1.02 percent of its 13F equity portfolio to HUBB.

As one would reasonably expect, key hedge funds have been driving this bullishness. D E Shaw, managed by D. E. Shaw, established the biggest position in Hubbell Incorporated (NYSE:HUBB). D E Shaw had $7.7 million invested in the company at the end of the quarter. Larry Foley and Paul Farrell’s Bronson Point Partners also initiated a $4.1 million position during the quarter. The following funds were also among the new HUBB investors: Paul Tudor Jones’s Tudor Investment Corp, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.

Let’s now review hedge fund activity in other stocks similar to Hubbell Incorporated (NYSE:HUBB). These stocks are Kilroy Realty Corp (NYSE:KRC), Omega Healthcare Investors Inc (NYSE:OHI), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), Newell Brands Inc. (NASDAQ:NWL), Lamar Advertising Company (REIT)(NASDAQ:LAMR), The Interpublic Group of Companies Inc (NYSE:IPG), and American Airlines Group Inc (NASDAQ:AAL). All of these stocks’ market caps match HUBB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KRC 20 411400 0
OHI 23 107776 6
OCFT 5 8062 2
NWL 33 1244198 9
LAMR 44 419738 10
IPG 22 501395 1
AAL 47 436618 11
Average 27.7 447027 5.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $447 million. That figure was $335 million in HUBB’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 5 bullish hedge fund positions. Hubbell Incorporated (NYSE:HUBB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HUBB is 62.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on HUBB as the stock returned 14.7% during Q3 (through September 14th) 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.