In this article we are going to use hedge fund sentiment as a tool and determine whether Huron Consulting Group (NASDAQ:HURN) 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 HURN a good stock to buy now? Investors who are in the know were becoming hopeful. The number of bullish hedge fund positions went up by 1 in recent months. Huron Consulting Group (NASDAQ:HURN) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that HURN 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). There were 11 hedge funds in our database with HURN holdings at the end of June.
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 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 S&P 500 ETFs by 66 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 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.
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 review the recent hedge fund action surrounding Huron Consulting Group (NASDAQ:HURN).
Do Hedge Funds Think HURN Is A Good Stock To Buy Now?
At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in HURN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Huron Consulting Group (NASDAQ:HURN), with a stake worth $12.9 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $5.5 million. D E Shaw, Millennium Management, and GLG Partners 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 Engineers Gate Manager allocated the biggest weight to Huron Consulting Group (NASDAQ:HURN), around 0.04% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to HURN.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Huron Consulting Group (NASDAQ:HURN). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.3 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Huron Consulting Group (NASDAQ:HURN) but similarly valued. These stocks are Fanhua Inc. (NASDAQ:FANH), OrthoPediatrics Corp. (NASDAQ:KIDS), Systemax Inc. (NYSE:SYX), Fulgent Genetics, Inc. (NASDAQ:FLGT), Dine Brands Global, Inc. (NYSE:DIN), SFL Corporation Ltd. (NYSE:SFL), and AZZ Incorporated (NYSE:AZZ). This group of stocks’ market valuations match HURN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $31 million in HURN’s case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Fanhua Inc. (NASDAQ:FANH) is the least popular one with only 5 bullish hedge fund positions. Huron Consulting Group (NASDAQ:HURN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HURN is 44.7. 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. A small number of hedge funds were also right about betting on HURN as the stock returned 24.1% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.